Back in 2006, a good friend of mine was pressing me to get into real estate.
He was big in housing at the time and was looking for investors to help fund buying property for development.
I was younger and single with expendable cash, but I shied away. I wasn’t comfortable buying something I couldn’t hold in my hands.
Passing on the opportunity turned out to be one of the best decisions I could have made.
A few months later, the infamous housing bubble burst created a credit crisis that turned into the Great Recession from 2007 to 2009.
But that’s in the past.
Things have started to look up for the real estate market. And I’m going to tell you how you can capitalize on the rise without spending a single penny on actual property.
Real Estate Market Looks Attractive
Now seems to be a perfect time to buy a home.
According to the National Association of Realtors, the average monthly house payment is $995 compared to $1,048 a year ago. And interest rates haven’t been this good in years.
The average interest rate for a mortgage is 3.35%, according to Bankrate. By comparison, the average mortgage interest rate in 2019 was 4.04%.
The lower interest is a difference of more than $100 a month in payments and more than $40,000 in interest over the term of a 30-year loan.
It’s much cheaper to buy a home now than it was a year ago.
And the cost to build is also dropping.
CoreLogic, a real estate data provider, found that building material costs are down 2.4% annually from 2019.
So how can you capitalize on these real estate trends?
One Way to Invest in Real Estate Pays You
In 1960, Congress created a way to invest in real estate. Now it’s easy for investors like you and me to own equity stakes in large real estate companies.
One of the caveats to this was the investment had to return at least 90% of taxable income back to shareholders each year.
In short, it pays investors to buy in.
Not a bad deal, right?
Of course, I’m talking about real estate investment trusts.
REIT Performance Shows Promise
As with any investment, there are ebbs and flows.
Individual stocks can rise and fall with a simple headline.
REITs are no different.
As recent as January 2020, returns on REITs were in the red, but they are showing signs of making a solid comeback. They’ve already bounced back up to the black in just a few months.
Comparing them against major stock market indexes, REITs have started to return as much as the S&P 500, Dow Jones and Russell 2000.
REITs are mounting a comeback, and investors stand to gain by investing in this trend now.
And there are many different REITs you can choose from. Some focus on residential real estate, while others invest in and manage commercial real estate.
There are also exchange-traded funds that hold REITs.
The bottom line is that the real estate market is making huge strides. REITs are a great way to get in on those trends up without spending any money on actual property.