With rising interest rates and persistently high home prices, American homebuyers have found their budgets tight.
Real estate mogul Grant Cardone says there is an imminent need for significantly longer mortgage terms.
“America’s savior is not lower prices, but longer mortgages,” he said in a recent TikTok video. “Over the course of your lifetime, your mortgage can go from 30 to 40, 50, or even 60 years. If you live long enough, you might be able to get a 100-year mortgage in America. ”
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Despite this, Cardon expresses skepticism about the role of mortgages in achieving true homeownership.
“A mortgage is just a fancy way of saying you own something you don’t own,” he explained.
Cardone predicts major changes in lifestyle and consumption patterns in the future. He sees a future where renting becomes the norm in many aspects of life.
“America will become a nation of renters,” he predicted. “We might rent a car, rent a place to live, and maybe even rent clothes in the future.”
But what if you’re still interested in investing in real estate, given its reputation as a hedge against inflation, a source of passive income, and a way to diversify your portfolio?
Despite the current economic challenges, there are certainly strategies to invest in real estate without taking on large amounts of debt. Here we will introduce three of them.
Invest in listed REITs
Real estate investment trusts (REITs) are companies that own income-producing real estate, such as apartment buildings, shopping centers, and office towers.
REITs can be thought of as giant landowners. A REIT owns a large number of properties, collects rent from tenants, and passes that rent on to shareholders in the form of regular dividends.
To qualify as a REIT, a company must annually pay out at least 90% of its taxable income to shareholders as dividends. In exchange, REITs pay little or no corporate-level income taxes.
Many REITs are publicly traded, making it easy to invest in them.
Unlike buying a home, which can take weeks or even months to complete, REIT stocks can be bought and sold at any time during the trading day. That makes him one of the most liquid real estate investment options.
And you can invest as little or as much as you need, whether it’s $100 or $100,000. Buying a home typically requires a large down payment and mortgage, but REITs allow you to invest for as little as the price of one share plus brokerage fees.
Invest in crowdfunding platforms
Crowdfunding has become a buzzword in recent years. Refers to the act of raising small amounts of money from many people to fund a project.
These days, many crowdfunding investment platforms allow you to own a piece of physical real estate, from rental properties and commercial buildings to land parcels.
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Because real estate crowdfunding involves significant risks, some platforms are aimed at accredited investors, and in some cases, minimum investment amounts can reach tens of thousands of dollars. To become an accredited investor, you must have a net worth of more than $1 million or earned income of more than $200,000 (or $300,000 with your spouse) in the past two years.
Even if you are not an accredited investor, many platforms allow you to make small investments (even $100).
Such platforms make real estate investing more accessible to the general public by simplifying the process and lowering barriers to entry.
Crowdfunding platforms and real estate deal sponsors typically charge investors some fees.
invest in ETFs
Choosing the right REIT or crowdfunding deal requires thorough due diligence. If you’re looking for an easier and more diverse way to invest in real estate, consider exchange-traded funds.
You can think of an ETF as a portfolio of stocks. Also, as the name suggests, ETFs trade on major exchanges, making them convenient to buy and sell.
Investors use ETFs to access a diverse portfolio. You don’t have to worry about which stocks to buy or sell. Some ETFs passively track an index, while others are actively managed. All of these charge a fee called a management expense ratio in exchange for managing the fund.
For example, the Vanguard Real Estate ETF (VNQ) provides investors with broad exposure to US REITs. The fund holds 160 stocks and has total net assets of $54 billion. Over the past 10 years, VNQ has delivered an average annual return of 6.4%. The management fee rate is 0.12%.
You can also check out the Real Estate Select Sector SPDR Fund (XLRE), which aims to replicate the real estate sector of the S&P 500 index. The company currently holds 31 stocks and has an expense ratio of 0.10%. Since the fund’s inception in October 2015, the average annual return has been 6.2%.
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This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.