5 Easy Ways to Invest In NJ Real Estate

Different ways of putting your money into NJ real estate

 

Buying NJ real estate involves more than just finding your next home. Investment in real estate has become very popular over the last half century. Although the NJ real estate market has plenty of opportunities for making big gains, buying and owning real estate is more involved than investing in stocks and bonds.

See below for several ways to buy real estate for investment purposes:

Basic NJ Real Estate Rental Properties

This is an investment that dates back to the practice of landownership. A person will purchase a property and rent it out to a tenant. The owner, known as the landlord, is responsible for paying the mortgage, taxes and property maintenance costs. Ideally, the landlord charges enough rent to cover all of the aforementioned costs, sometimes more to gain a profit. Naturally, there are downsides to being a landlord such as bad tenants who damage the property or refuse to pay rent, leaving you with negative monthly cash flow. You should assess whether or not you are capable of taking on the responsibilities involved and if it is cost-effective for you to become a landlord.

Leverage

With the exception of REITs, investing in NJ real estate gives an investor one tool that is not available to stock market investors: leverage. Most "conventional" mortgages require 25% down. However, there are also many types of mortgages that require as little as 5%. In other words, you are in control of the whole property and the equity it holds by only paying a fraction of the total value. This is a major benefit to both real estate flippers and landlords. They can take out a second mortgage on their homes and put down payments on one or two other properties. Whether they hold on to the home awaiting the opportunity to sell for a profit or rent it out to tenants who ultimately pay the mortgage, they are in control of these assets.

NJ Real Estate Trading

Similar to stock market day traders, real estate traders buy properties with the intention of holding them for a short period of time, often no more than three to four months, before they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market. These buyers will obtain property and put little or no money into them for improvement before relisting them on the market. This method of investment can prove to be either a short-term or long-term cash investment, depending on how long the home is held for.

Real Estate Investment Groups

Real estate investment groups are comparable to small mutual funds for NJ real estate rental properties. If you want to own a rental property, but do not want the hassle of being a landlord, a real estate investment group may be the answer for you. The way in which it works is a company will buy or build apartment blocks or condos, allowing investors to buy them through the company. Although a single investor can own one or multiple units, the company operating the investment group collectively manages all the units such as taking care of maintenance, advertising vacant units, and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.

REITs

A real estate investment trust is created when a corporation, or trust, uses investors' money to purchase and operate income properties. REITs are bought and sold on the major exchanges just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends to keep its status as an REIT. A benefit to this is the avoidance of paying corporate income tax. Similar to regular dividend-paying stocks, REITs are a solid investment for stock market investors seeking steady income. In comparison to other types of NJ real estate investment, REITs allow investors into non-residential investments, such as malls and retail spaces, and can be cashed out at your convenience.

 

The NJ real estate market is changing rapidly and expanding into new avenues almost daily. Sometimes it can be very difficult to find the answers you need on a specific topic or issue. In times like these, you need a real estate professional who will provide valuable information and trustworthy advice. For more information about NJ real estate, call us today or click here to be connected with one of our top real estate specialists.