Although 10K may seem like a lot to invest in real estate, it won’t get you very far in the conventional real estate market. Given that the current median house sale price is $408,100, the 20% down payment needed for an investment loan would be more than $81,000, or $71,000 more than you need to put in.
Fortunately, there is a technique to invest in real estate that is far more economical. Here is a step-by-step guide on how to invest $10,000 in real estate right now if you’re searching for a play-by-play.
Purchase REITs
Real estate investment trusts, or REITs, allow investors access to premium real estate portfolios in almost every conceivable real estate sector. All of these portfolios are owned and managed by a reputable third-party business. To take advantage of certain tax benefits provided by the REIT structure, these distinctive real estate equities must adhere to tight regulations. For instance, REITs are required to pay 90% of taxable income in dividends, and 95% of income must come from real estate or assets tied to real estate, such as mortgages. These requirements can result in consistent, higher dividend yields for investors.
REITs have generally outperformed the S&P 500 over the previous 20 years, outperforming it by over 10% in 2021, making them an appealing long-term choice for real estate investing. As many REITs are listed publicly, 10K can buy a lot of stock in a few important companies.
Broaden your 10K industry diversity
The foundation of any 10K portfolio is diversification. Like other businesses, real estate is not exempt from economic hardships, and what affects one industry may not have a negative effect on another. It’s crucial to educate yourself on the opportunities and hazards unique to each business and diversify your $10,000 over a number of real estate industries in order to reduce your risk exposure. I advise you to put $2,000 into the five specialized industries’ most promising stocks.
For almost three decades, self-storage has consistently outperformed all other REIT sectors. It generated a 79% return on investment in 2021 and has sustained that return for 27 years at 18%. If you’re investing in real estate, it’s a must-buy given the industry’s resiliency to downturns. As Public Storage (PSA -0.09%) is the largest self-storage REIT with a very high-quality global portfolio, it is a well-liked option among self-storage REITs. Public Storage quickly added 232 facilities to its portfolio in 2021 for a record $5.1 billion, positioning it for a successful 2022 and beyond.
When less is more
As demand for rental homes and industrial space increases, residential and commercial real estate is giving self-storage a run for its money. Unprecedented expansion in both sectors has been fueled by the emergence of e-commerce, issues with supply chains, and a scarcity of housing, resulting in a 62% return for industrial REITs and a 58% return for residential REITs in 2021.
Residential operators with significant exposure to the Sun Belt, like Mid-America Apartment Communities (MAA -0.10%) and Camden Property Trust (CPT 0.11%), are seeing higher lease rates, grow the rent, and much less vacancies than cohorts in high-density entry markets, turning them into standout buys in today’s market. Data center and communications infrastructure investments are also wise choices. Because of our increasing reliance on technology, there will always be a need for the services provided by these REITs. Investors can access exposure to both of these businesses through American Tower (AMT -3.24%).
American Tower, a sizable communications infrastructure REIT first and foremost, has diversified into the data center industry through the acquisition of CoreSite Realty Corporation.
This company continues to be a secure but lucrative investment. It is one of the oldest and most dependable REITs in terms of dividend growth and overall returns.
One final word about 10K
And finally, another worthwhile sector to think into is industrial real estate. Increasing e-commerce sales will increase the need for industrial space. The nation’s industrial sector has a record-low vacancy rate, which has resulted in record rental growth. Although there are several top notch industrialized REITs to pick from, Prologis (PLD 0.03%) is the biggest industrialized REIT by market standards and the best-performing REIT in its industry.
For the long term, invest in and hold
Like any stock investment, real estate investing should be done over the long term. While REITs have historically produced superior returns, not every year is a success. You may make your 10K develop into much more if you have the patience and fortitude to ride out any market turbulence and set yourself up for long-term success.
Daniel