Miami Investors

5 Ways to Invest in Real Estate

If you've ever had a landlord, you probably don't dream of being one: Fielding calls about oversize bugs and overflowing toilets doesn't seem like the most glamorous job.

But done right, real estate investment can be lucrative, if not flashy. It can help diversify your existing investment portfolio and be an additional income stream. And it doesn't always require showing up at a tenant's every beck and call.

The trouble is that many new investors don't know where or how to invest in real estate. So here are five options, ranging from high maintenance to low.

1. Invest in rental properties
Tiffany Alexy didn't intend to become a real estate investor when she bought her first rental property at age 21. Then a college senior in Raleigh, North Carolina, she planned to attend grad school locally and figured buying would be better than renting.

"I went on Craigslist and found a four-bedroom, four-bathroom condo that was set up student-housing style. I bought it, lived in one bedroom and rented out the other three," Alexy says.

The setup covered all of her expenses and brought in an extra $100 per month in cash – far from chump change for a grad student, and enough that Alexy caught the real estate bug. Now age 27, she has five rentals and is a broker and owner of Alexy Realty Group in Raleigh.

Alexy entered the market using a strategy sometimes called house hacking, a term coined by BiggerPockets, an online resource for real estate investors. It essentially means you're occupying your investment property, either by renting out rooms, as Alexy did, or by renting out units in a multi-unit building. David Meyer, vice president of growth and marketing at the site, says house hacking lets investors buy a property with up to four units and still qualify for a residential loan.

Of course, you can also buy and rent out an entire investment property. Find one with combined expenses lower than the amount you can charge in rent. And if you don't want to be the person who shows up with a toolbelt to fix a leak "or even the person who calls that person "you'll also need to pay a property manager.

"If you manage it yourself, you'll learn a lot about the industry, and if you buy future properties you'll go into it with more experience," says Meyer.

2. Fix up and resell properties
This is HGTV come to life: You purchase an underpriced home in need of a little love, renovate it as inexpensively as possible and then resell it for a profit. Called house flipping, the strategy is a wee bit harder than it looks on TV.

'There is a bigger element of risk, because so much of the math behind flipping requires a very accurate estimate of how much repairs are going to cost, which is not an easy thing to do,' says Meyer.

His suggestion: Find an experienced partner. 'Maybe you have capital or time to contribute, but you find a contractor who is good at estimating expenses or managing the project,' he says.

The other risk of flipping is that the longer you hold the property, the less money you make because you're paying a mortgage without bringing in any income. You can lower that risk by living in the house as you fix it up. This works as long as most of the updates are cosmetic and you don't mind a little dust.

3. Use a crowdfunding service
If you're familiar with companies such as Prosper and LendingClub which connect borrowers to investors willing to lend them money for various personal needs, such as a wedding or home renovation you'll understand the concept behind investing through a real estate crowdfunding site.

Companies including RealtyShares and RealtyMogul connect real estate developers to investors who want to finance projects, either through debt or equity. Investors hope to receive monthly or quarterly distributions in exchange for taking on a significant amount of risk and paying a fee to the platform. Like many real estate investments, these are speculative and illiquid you can't easily unload them the way you can trade a stock.

The rub is that you need money to make money. Real estate crowdfunding is generally open only to accredited investors, defined by the Securities and Exchange Commission as people who've earned income of more than $200,000 ($300,000 with a spouse) in each of the last two years or have a net worth of $1 million or more, not including a primary residence.

4. REITs
REITs, or real estate investment trusts, allow you to invest in real estate without the physical real estate. Often compared to mutual funds, they're companies that own commercial real estate such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, which makes them a good investment in retirement. Investors who don't need or want the regular income can automatically reinvest those dividends to grow their investment further.

REITs can be varied and complex. Some trade on an exchange like a stock; others aren't publicly traded. The type of REIT you purchase can be a big factor in the amount of risk you're taking on, as non-traded REITs aren't easily sold and might be hard to value. New investors should generally stick to publicly traded REITs, which you can purchase through an online broker.

5. Rent out a room
Finally, to dip the very edge of your toe in the real estate waters, you could rent part of your home via a site like Airbnb. It's house hacking for the commitment-phobe: You don't have to take on a long-term tenant, potential renters are at least somewhat prescreened by Airbnb, and the company's host guarantee provides protection against damages.

When it Comes to Flips, Watch Out for This

Home flipping is growing at a rate comparable to 2006, and some real estate pros are warning buyers to be cautious and do their homework before purchasing a property they plan to flip.

"Some flippers are turning historic homes into modern, hybrid treasures, but others are slapping cosmetic fixes on truly troubled properties, ignoring mechanical and structural issues," CNBC reports. "For more unsuspecting buyers, that move-in-ready dream home can quickly flip into a nightmare."

That was the case for one buyer, Cameron McGuire, who had purchased a three-bedroom, three-bathroom condo in Washington, D.C., that had been renovated by a local developer-flipper. Six months after moving in, McGuire received a call from a Washington, D.C., housing inspector who had been investigating claims against the developer by other buyers.

The inspector "gave us list after list after list of things that were either not permitted or violations or weren't zoned correctly here in the property," McGuire told CNBC. "Receptacles are not permitted the way that they're installed here. The canned lighting up in the ceiling is not permitted the way that it is supposed to be in here. … It was an unending list of things." Permits for a back addition, which included two bedrooms and two bathrooms, also had never been filed, which means that McGuire now must tear it down.

"It's literally putting lipstick on a pig," Stephen Carpenter-Israel, president of Buyer's Edge, told CNBC about some home flips. "They're just doing cosmetic stuff and actually covering up problems, and that's scary because it's very difficult to figure it out."

CNBC provided some of the following tips for buyers purchasing a flip:

  • Make sure the house flipper is a licensed contractor
  • Request a list of all the work done and ask of receipts and warranty information
  • Check for permits on the property
  • Ensure all upgrades pass full inspection

Russia Now Top Country Searching Miami Real Estate

Russia is the most-active country searching Miami real estate for the first time since the Miami Association of Realtors® (MIAMI) began tracking search data in 2013.

In November, Russia registered the most South Florida property searches among all countries on the Realtor association's search portal. Colombia and Venezuela finished second and third, respectively.

"Miami's emergence as one of the world's top cities is attracting buyers from a greater array of countries than before," says Christopher Zoller, 2017 chair of the Miami association.

The Miami city of Sunny Isles Beach, for example, has a large Russian population and is known as "Little Moscow" for its propensity of Russian-owned delis, restaurants, beauty spas, supermarkets and real estate companies. About 7.4 percent of Sunny Isles residents list Russian as their first language, according to the U.S. Census.

Vladislav Doronin, who owns 7 million square meters of real estate in Moscow, is one Russian developer who has spent significantly on Miami real estate, including paying $54 million for a waterfront two-acre parcel in Edgewater in November 2016.

Some investors see President-Elect Donald Trump's election in November as a sign that relations between Russia and the U.S. may soon improve. The number of Russians who have expressed interest in buying luxury properties in the United States has increased by 35 percent over the previous year after Trump's victory, according to global real estate consultancy Knight Frank.