How Can Day Traders Start Investing in Real Estate

Some day traders are wondering how they can start investing in real estate. This usually leads to people asking the question, what’s a better investment stocks or real estate? Why not both? If you’ve been day trading, the current stock market might be making you question whether there are other options. Typically, when stocks go down, investors will move their investments into real estate, commodities and precious metals. Doing so helps protect their wealth as the economy becomes pessimistic of the future and stock prices go down.

Since the great recession, real estate value has been growing rapidly. More so in the past two years since the beginning of the pandemic. People have begun working remotely, requiring more space, which in turn is creating more competition for single family homes that are not getting built as quickly as condos and attached homes. This is especially true in larger cities where there is a housing crisis, land is becoming scarce, and housing density is increasing. Creating more demand and competition for the existing homes. 

As homes quickly become more and more expensive, many investors feel that they may have missed the boat on this, making them hesitant in investing in real estate. However, there’s no need to be afraid. Instead, focus on what makes the housing market different from the great recession. From there, you will understand how much more safe the real estate market is now compared to then.

Day Traders Can Invest in Real estate investment trusts (REITs)

This is the most familiar type of investing for day traders. Real estate investment trusts, or REITs, are companies that own, and in most cases operate, income-producing real estate. This can include hotels, shopping centers, apartments, and other forms of real estate. Purchasing this type of investment allows you to invest in multiple properties with a single investment. Furthermore, REITs provide excellent dividends and are a great portfolio diversifier. 

Another way to think about REITs are that they are the mutual funds of the real estate world. Thousands of investors buy shares of REITs and contribute money to a pool, and professional managers decide how to invest it.

What’s great about REITs is that it allows anyone to invest in real estate. Your ordinary person can’t just buy an apartment building, a mall, or own a book of mortgages. Instead of needing billions, you just need hundreds of dollars to start and now with fractional ownership, you can start with tens of dollars. 

Furthermore, did you know that REITs are required to pay out 90% of their taxable income out as dividends? And most REITs pay out 100% of their taxable income. This is why they pay out higher than average dividend yields. 

There are several types of REITs and I’d recommend you to research them.

Day Traders Can Invest in Rental Properties

Unlike REITs, rental properties are hard assets that have the potential to provide consistent returns. There are three ways you earn money through rental properties.

1. Cash flow from rental income.
2. Equity that grows over time and while you pay down your mortgage. 
3. If/when you decide to pay sell your property

How to invest in rental properties

Investing in a rental property is just like purchasing a typical property. You find a home or apartment, then you buy it or finance it, and then you rent it. Pretty simple right? Depending on what financial strategy you choose to purchase the house, you can put down as little as 1%. A strategy like this would require leveraging a subject to real estate deal. 

When leveraging this strategy, you may be able to buy a property for less than you would need for an initial REIT investment. Depending on the deal, you may be able to generate more profits through purchasing a rental property. For example, if you use a subject to deal to purchase the property and assume the owner’s mortgage obligation, there might be enough of a differential for rental rates that can net you $500 a month in cash flow. Imagine if you were able to purchase a home subject to for $1,000. You’d recoup your initial investment after two months and would be generating positive cash flow thereafter. 

To learn more about how to buy homes for as little as 1% down with no credit check, I invite you to download my Investor kit. 

So whether you’re buying REITs of rental properties, your money is safer in real estate. And it could possibly be more lucrative than the stock market.