How Much to Invest in Real Estate

Whether your investment goals are long-term wealth creation, saving for a dream

wedding or retirement or generating consistent income, real estate can play a big

part in your financial picture. But how much to invest in real estate depends on your

personal situation, and the best way to get involved isn’t always the same for

everyone. The right solution for you may be to directly own a property, or it could be

through real estate investment trusts (REITs), crowdfunding platforms or other

options that provide exposure to the market without all of the work and risk

associated with physically purchasing a property.

In the past, real estate investing typically meant purchasing a physical property and

either renting it or fixing it up and selling it. While that still remains a popular way

for investors to grow their wealth, there are now many options that make real estate

investing more accessible than ever. Fintech apps such as Arrived allow people with

as little as $100 to own shares in real estate properties across the country. These

investments are typically pooled with dozens or even hundreds of other investors, so

you’re not the only person financing the deal. Those who don’t want to take on the

responsibilities of being a landlord can use REITs and crowdfunding platforms that

specialize in commercial real estate to gain broader exposure with a smaller initial

investment.

For those looking to grow their wealth over the long term, rental properties are a

solid option that can deliver steady returns. Depending on location, the ROI can be

higher or lower than with other types of investments. For example, homes in

metropolitan cities or tourist attractions are likely to appreciate more quickly than

other areas. Similarly, properties near schools often have high sale and rental

While the potential for capital appreciation is attractive, balancing the mortgage

payment with ongoing operating costs can be challenging. For this reason, it’s

important to understand the numbers before making a commitment. A general rule

of thumb is that the sum of a rental property’s operating expenses should not

exceed 50% of its monthly income. This can be difficult to estimate, but it’s a good

place to start your analysis.

When deciding how much to invest in real estate, it’s important to consider your

personal circumstances and whether you have the time and skills to manage a

property on your own. If you have limited time or resources, it’s better to invest in

residential rentals or REITs rather than a single-family home. And if you’re new to the

industry, you may find it easier to join a joint venture with another investor who can

handle day-to-day operations and maintenance. You can also find opportunities to

invest in commercial real estate through these types of platforms, which often offer

more aggressive leverage than a traditional mortgage loan.