You know that expression, “It takes money to make money?” Well, there’s a fair amount of truth to it, especially within the realm of investing.
Specifically, if you want to grow wealth by investing, you need to start somewhere. But that doesn’t mean you need hundreds of thousands of dollars to build a successful, diverse portfolio.
If you have just a few hundred dollars to your name, you can load up on different stocks that pay you dividends and gain value nicely over time. Similarly, it’s possible to invest in commercial real estate, even if you don’t have close to the amount of money it might take to own a building.
A good way to get into real estate
Investing in real estate is a great way to branch out in your portfolio, and there are different ways you can do so. One option is to buy income properties, hold them for many years so they gain value, and collect rent payments from tenants to secure a steady flow of cash. To be clear, those income properties can be of the residential or commercial variety.
But income properties require a larger up-front investment, so if you’re not particularly flush with cash, they may not be such a viable option. But one option that absolutely is on the table is buying REITs, or real estate investment trusts. You can easily load up on REITs, even if you have under $1,000 to work with.
REITs are companies that own and operate different types of income-producing properties. The upside of buying REITs is getting a piece of the real estate action without assuming the risks of owning physical property yourself.
REITs offer two opportunities to make money. First, like regular stocks and income properties, their value can grow over time, so if you hold them for many years, your shares might appreciate nicely in value.
Second, REITs are required to pay at least 90% of their taxable income to shareholders as dividends. As such, REITs commonly pay more generous dividends than regular stocks. That’s money you can cash out as you need or reinvest for added growth in your portfolio.
How to get started with REITs
If you’ve never owned REITs before, a good bet is to take a deep dive into the different REIT segments you can choose from. You might, for example, decide to choose healthcare REITs because healthcare is an industry that can thrive even during an economic recession. Or you might choose to invest in hotel REITs because you anticipate a huge uptick in travel now that COVID-related restrictions seem to be easing.
These are just a couple of examples. But the point is that there are many REITs trading for well under $1,000 a share, so once you narrow down the segment you’re interested in, you can then look at specific companies within that sector.
A lot of brokerages allow you to buy REIT shares on a fractional basis. If money is tight, you can purchase partial REIT shares if full shares are out of reach.
All told, it’s more than possible to build a nice real estate investment portfolio without a lot of money and without purchasing an actual property you’re tasked with managing. It pays to dive into REITs, especially if you like the idea of holding an investment that can make you money in two different ways.
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