Whether you’re an experienced investor or just starting your wealth-building journey, diversifying your portfolio with real estate can be a great idea. Even during uncertain times in the stock market, people need homes to live in and, usually, offices or commercial space for shops and restaurants. 

But real estate isn’t a monolith. There are so many different types of properties, and virtually endless markets and ways to invest. Here’s what you need to know about how to diversify your portfolio with real estate.

What is diversification?

In the simplest terms, diversification refers to spreading your money out in different markets, across different asset types, and with various investment strategies. You don’t want all your investing power in one stock or even in one sector of exchange-traded funds. Your overall investment portfolio can and should eventually contain investments in stocks, mutual funds or ETFs, real estate (commercial and residential), precious metals such as gold, and maybe even alternative assets like art or antiques. Basically, don’t put all your eggs in one basket.

Take the most successful entrepreneurs for example. They rarely put all of their money and time into one business, but instead, spread it over multiple businesses, joint ventures, or passive income avenues. These entrepreneurs are not at risk of financial ruin if one of their investments falls on tough times or fails completely. This is a great example of diversification for business purposes.

What are the benefits of diversification? 

There are some significant benefits to diversifying your investment portfolio. When you “spread the wealth” as an investor, you spread risk between multiple types of investments. If one investment does poorly, the idea is that it will be offset by the performance of other uncorrelated investments.

Diversification also ensures your journey toward wealth won’t be so volatile. You’ll avoid the roller coaster experience that someone without a diverse portfolio feels, such as those invested entirely in individual stocks since the stock market can steeply rise or fall weekly.

Why should you diversify your portfolio with real estate investments?

It’s always important to diversify your portfolio, and to diversify each aspect of it as well. Even if you have a high risk tolerance in pursuit of short-term gains, you wouldn’t want to put all your money into the same private equity firm or mutual fund. If something were to happen to one of them, then all your money would be at risk.

Maintaining a real estate investment portfolio is widely considered to be a conservative investment strategy, as property generally appreciates in value over time, even when the stock market falters. 

There are so many ways to break in — from flipping houses or holding multifamily properties for rental income, to commercial real estate investing, REITs, or real estate investment trusts, you can find ways to break in at virtually any price point. Here are some of the biggest reasons you should consider diversifying your portfolio with real estate. 

Lower your overall investment risk 

One of the best parts about real estate investment as a personal investment is that prices are independent of the activity on Wall Street. That is why using real estate to diversify your portfolio can lower your overall risk. While the stock market might decline in a month, the real estate market might continue to see increasing prices. This helps reduce the risk in an investor’s portfolio.

Balance out volatile investments 

Another reason to use real estate to diversify your portfolio is that home prices aren’t as volatile as the stock market. When you search for real estate investments, you are going to come across median prices, or prices that are common in certain areas or neighborhoods. While some neighborhoods or rental properties may exhibit more risk, their prices will not change drastically next weekend or even next month. 

Hedge against inflation 

The real estate market is an excellent hedge against inflation. Property values often tend to stay on an upward curve over time because the population is ever-increasing and people always need a place to live. If you’re hesitant because you remember The Great Recession of 2008, you should know that residential home values were back above their ‘07 value in less than 10 years – reganing value much faster and with more stable growth than the stock market.

Generate income with minimal effort 

Real estate investing provides you the opportunity for recurring income without any additional time or effort on your part, depending on how you invest. 

Owning residential rental properties or prime vacation rentals, for example, provides you with regular cash flow you can rely on. And many property management companies will take on all the day-to-day tasks —  such as cleaning, maintenance, finding renters, etc.— so the investment requires relatively little time on your part.

Additionally, property generally appreciates over time, increasing in value as costs rise, keeping pace with or exceeding inflation. Home prices have grown an average of 17.5% in the U.S. over the last yearalone.

How to diversify your portfolio with real estate

The way you balance your asset allocation depends on your time horizon and your risk tolerance. If you’re close to retirement, your time horizon is on the shorter side and your tolerance for risk should be relatively low, so you’d likely have a higher allocation in fixed income assets and securities and real estate, which aren’t as volatile as the stock market. If you’re fresh out of college and just getting started building your portfolio, you have a longer time horizon and the ability to take on more risk, so you’ll likely have a higher allocation towards stocks and real estate with little exposure to bonds. Here’s what you need to know about diversifying your portfolio.

Diversify by asset type 

A balanced portfolio contains a range of different types of assets, such as cash-like assets (hard currencies or savings in money market-style accounts), property, stocks, and other kinds of investments. It’s also best to diversify within each of these categories. 

For example, you may not want to put all of your investment money for the real estate portion of your portfolio into a single real estate investment group or a single type of real estate, such as commercial properties. Instead, you can protect yourself against fluctuations across the market by spreading out your investment between commercial property, residential rental properties, land, and so on..

Diversify by asset class 

An asset class is a group of investments that are similar and subject to the same laws, such as commercial properties, single-family homes, and multi-family rental properties.

Diversifying your portfolio by asset class means building a portfolio with different types of assets that are unaffected by one another, so that if one asset class starts to decline, the others will remain afloat. 

For example, it may be wise to invest in both vacation rentals and multi-family homes. That way, if people stop traveling—as they did during the early days of the pandemic—not all of your investments will stop generating passive income at once. Even when people aren’t traveling on vacation, rental homes are still needed for full-time residents. 

Likewise, real estate is just part of this equation. It’s smart to have investments across a range of asset classes such as stocks, bonds, real estate, and cash-like money market savings accounts, which can cushion your portfolio against a crash in any one of these areas.

Diversify further across real estate markets 

If the aim is a diversified overall portfolio, individual investors should buy shares in multiple properties, and in multiple markets. This is like double-diversification – you diversify into real estate and also diversify across multiple properties across the US. By doing so, you reduce your risk profile significantly, especially if there’s an issue with any singular property or area. 

Within the investment world, diversification across asset classes, geographical markets, and asset types allows you to protect against the downside without significantly impacting your upside potential.

You can invest in fractional shares of real estate properties in many cities across the United States to your portfolio by investing through a crowdfunding platform like Vantage horizon. Vantage lets you buy multiple shares of different rental properties without getting involved in the hassle of owning or managing a property yourself.

Diversify by strategy 

There are many strategies you can use in real estate investing to generate income while hedging your bets against market changes. Some are short-term strategies—like buying a house in an up-and-coming market, holding for a price increase, and selling as soon as the market takes off—and others rely on long-term appreciation. 

For example, in some housing markets that are expected to experience significant growth in the next decade—such as in neighborhoods with long-term prospects for public transit that connects them more directly with major cities—you may plan to buy and hold properties to make rental income in the short-term and profit off of significant appreciation in the long-term. Another strategy could be to flip houses—buying them in order to renovate them and resell them quickly for a profit in a hot market.

Mistakes to avoid when diversifying your portfolio with real estate 

Even though real estate is a fairly conservative investment in terms of risk, new investors often lose money when they move too quickly or don’t do enough research before closing a deal. Here are a few common mistakes to avoid.

Don’t forget to check your bias

It’s always important to remember that having a diversified portfolio is the best way to protect your net worth against market volatility. Even if your family or friends are experienced real estate investors who’ve made all their money from one type of real estate—say, single-family homes providing steady rental income—you’ll still be better off diversifying your own portfolio. 

Make sure your portfolio is actually diverse

There are many different types of properties you can own, from commercial real estate like office buildings to vacation rentals and hotels to alternative investments like houseboat moorings or land you can lease out. A truly diverse portfolio would include different types of properties in different markets. If you have real estate spread across several cities and states, a downturn in one neighborhood or city where you’re invested wouldn’t tank your whole portfolio. But if all your real estate is in one place and suddenly people are moving out in droves—the way people left New York en masse during the pandemic—your portfolio could be in trouble.

Don’t invest more than you can afford to lose

While investing in a real estate portfolio is generally a fairly safe hedge against market volatility, it’s impossible to predict the future. And even if your assets remain strong during a downturn, property is still an illiquid asset, which means turning that commercial property or multifamily home into cash could take some time. Never invest so much money that you’d be at risk if you couldn’t immediately sell the assets.

Always have an exit strategy

While some real estate investments work more like stock, where you can buy and sell shares without a physical stake in a property, many others don’t. That means it’s important to know how you’re going to get out—what your sale options are or where you could look for additional investors—before you end up in an emergency situation with too much liquidity tied up.

Don’t overestimate your abilities—hire a professional when you need to

Do lots of people make significant money from flipping houses or managing residential properties on their own? Sure. But if you’re just starting out and you’ve never been a property manager, it’s easy to overlook all the work it requires to turn an investment opportunity into serious cash flow.

Always do enough research—and hire a lawyer or inspector when needed

Again, one of the biggest mistakes you can make is to overestimate your own knowledge and skills. This applies to decision-making, too. If you’re not sure you’re making a good investment, you can contact a lawyer, inspector, or other expert to go over that contract, triple-check that potentially faulty wiring, or explain how a new town ordinance or public transit route could impact a property’s value over time.

How to diversify with Vantage Homes 

There are two ways to diversify with Vantage horizon. Both are extremely easy and beneficial to new and experienced investors. 

Diversify with real estate 

The first way you can diversify with Vantage Horizon is to invest in real estate if you do not already have any real estate present in your portfolio. We have a very simple process that includes a team of experts to make the investment process go smoothly. You can invest anywhere from $5,000 to $1,000,000 in any home or homes listed on our site.

Diversify across location 

Another way you can diversify with Vantage horizon is to invest across multiple properties and markets. Consider the difference in how a home in Detroit, MI may perform in comparison to a home in San Francisco, CA. Each housing market has its own cycles. 

Rather than attempting to predict each market’s cycle, you have the ease and opportunity to diversify across many markets. We have many properties available located in various cities, rural and urban, across the country. This allows you to easily find multiple, beautiful homes and spread your investment capital across the US instead of in just one or two rental properties. 

Though this type of diversification has historically been limited to wealthy investors able to afford multiple properties, with Vantage horizon, you can easily invest in multiple locations because of our fractional investing model. 

Fractional Ownership in Real Estate: Is it Worth it?

Real estate continues to be the preferred form of investment to build wealth, especially with rising inflation and the volatility of the stock market. However, according to a Pew Research Center survey,seven out of ten Americans think young adults today have a harder time becoming homeowners and saving for their future than their parents’ generation, especially as house prices have grown markedly faster than incomes in the last decade. 

This has given rise to shared ownership and crowdfunding models in the real estate market, key among them fractional ownership in real estate. 

What is fractional ownership in real estate? 

Fractional ownership in real estate is a way of buying a portion or percentage of a property. The asset – in this case, a real estate property – is divided up into several parts or fractions, making it available for purchase to a larger number of co-owners with fractional interest. 

With fractional real estate investing, the cost of the property is split between multiple shareholders, and so is the profit. As the value of the property increases, so does the rental income and equity. The property is usually maintained by a third-party management company that looks after the repairs and maintenance, and is paid proportionally by the co-owners of the property.

Fractional ownership as a real estate investment vs. vacation property

Not everyone who invests in real estate as a fractional owner does so for the investment. For some people, fractional ownership is a fantastic way to own a second home or a high-end vacation property without buying it outright. 

Fractional ownership as a real estate investment

Fractional ownership of a rental property is often a long-term investment that creates short-term rental income as well as long-term equity. Platforms such as Arrived Homes allow non-accredited investors to purchase shares of individual rental properties in some of the highest growth US rental markets. 

It should be noted that fractional ownership is not the same as investing in a publicly-traded REIT (Real Estate Investment Trust), which is traded on the stock exchange. This said, fractional ownership can sometimes be structured as a non-trading REIT, which can have greater tax benefits for investors. Rental properties on Arrived are all structured as non-trading REITS, meaning there are no limitations on who (accredited and non-accredited alike) can invest. To maintain this structure.

Fractional ownership of a vacation property

Fractional ownership of a vacation property is often more about usage than investment. When you buy a portion of a luxury resort vacation home, for instance, you get access to it for a certain number of weeks each year, allowing you to enjoy and use a property that you may have otherwise been out of reach. 

Fractional owners can use their allotted time themselves or pass it on to family members, friends, or colleagues. Property managers for fractional ownership vacation homes often oversee properties in multiple locations and countries, giving owners the option to trade in time in their own property for a property elsewhere. Ownership interests in fractional properties can be passed on to heirs. 

Fractional ownership of a vacation home vs. timeshare 

Fractional ownership of vacation homes often gets confused with timeshare ownership. There are, however, key differences to keep in mind as you think about investing in fractional real estate. 

• Ownership: When you buy fractional ownership in a vacation home, private residence club, or destination club, you receive a deed for your portion of the equity. You are, in effect, co-owning a property with several other buyers. With timeshare ownership, you’re paying for usage, that is, a certain amount of time that you can spend on the property each year.
• Time: Timeshares are often owned by 26 or 52 people, thus giving each owner a week or two at the vacation home. There are fewer buyers with fractional real estate investments, which allows each owner more amount of time at the property.
• Resale: You cannot sell a timeshare because when you buy a timeshare, you are not buying the property, but access to time in the property. This lack of ownership means that you cannot resell a timeshare. However, you can resell your fractional ownership of a property, because you’ve bought a portion of that property and, like with any other real estate bought in full, you have the right to sell, gift, inherit, or place it in a trust.

Is fractional ownership in real estate worth it?

There are several advantages to fractional ownership in real estate. Besides the low barrier to entry and the ability to leverage expert knowledge through a third-party management team, you can also spread out your investments and diversify your portfolio, something that is much harder to do with whole ownership. Here are some aspects of fractional ownership in real estate to consider when making your decision.

When you want equity in a home

When you buy a timeshare, you’re buying a portion of the time spent in the property. With fractional ownership, you’re purchasing equity. This may translate into time spent at the property, in the case of a vacation home, for instance, but primarily it means you’re making a real estate investment that has the potential to give you a rental income as well as a share of the profits as it increases in value. 

With fractional ownership properties, a property operator or management platform will create a Limited Liability Company (LLC) or Limited Liability Partnership (LLP) to own the property. The percentage of shares you own in the LLC or LLP will determine how much of the property you own and, therefore, the proportion of rights you have. 

If you’ve bought 25% fractional ownership in a home that’s rented out, for instance, you will be entitled to 25% of the rent. And as the value of the home appreciates, you can resell your share for a profit, just like with a traditional real estate investment. 

When you can’t otherwise afford or justify a second home

For many home buyers, the purchase of a second home is difficult to justify, especially if it’s something they won’t be using frequently. Financially, too, it can be out of reach for many without co-owners. The investment potential of a second home or a vacation rental, however, is hard to ignore. 

Fractional ownership allows for both investment growth potential and infrequent usage. By sharing rights of property ownership with co-owners, you’re able to use the property for a portion of the time and not pay for a vacation home that’s sitting empty most of the time. And it gives you access to a home that might have been difficult to afford if you were buying the entire property. 

When you want to spend more than 1-2 weeks at your vacation property 

One of the biggest similarities between timeshares and fractional ownership is co-ownership – that is, there are multiple owners for each unit. One of the biggest differences is the number of those co-owners. 

With timeshares, there are often 26 or 52 owners with a stake in the vacation property, giving them each a week or two weeks in the year in which to use their time. In the fractional ownership model, the buyers are far fewer, often between six and 12. This means that as a fractional owner, you typically have more usage rights and longer periods of occupancy in the property multiple times a year. This often works out to between four and eight weeks.

When you want to invest in real estate but don’t have the capital

If you’re looking for real estate or rental income outside of vacation home ownership, but don’t have the cash to cover the entire purchase price, fractional ownership in real estate can be the perfect investment method. 

Platforms like Vantage horizon  Homes will let you buy fractional ownership in homes in your desired location and get you started for between $5,000 and $1,000,000 As a co-owner of the property, say a condominium, not only do you get a share of the rental income in proportion to your ownership, but build wealth as the value of the home appreciates. 

One of the biggest benefits of fractional real estate investing is how quick and simple it is to get started building your portfolio without spending years saving up for a down payment, having perfect credit, or learning about the market. Your investment – however small – starts reaping rewards straight away, enabling you to not only climb the property ladder, but make gains from tenancy immediately.

When you want more control over your property

Unlike traditional real estate investments, fractional real estate ownership does not require you to deal with the hassle of maintenance and upkeep of a property (most of the time). A management team will usually take care of all those necessary details, including reports, marketing, and billing. 

While this is also true for timeshares, there is one key difference when it comes to fractional ownership: owners of timeshares have little to no control over how a property is maintained. It’s maintained accordinfg to the standards of the management company. 

This is not so with a fractional property. How much of a say you have will be determined by the proportion of your ownership in the property, but you are paying a property management team to handle your investment, and therefore have a say in how they act on the co-owners’ behalf. 

Easily invest in rental properties

It is easy to confuse timeshares with fractional real estate investing, but there are significant differences between the two ownership arrangements that are important to consider. If you’re looking to build your portfolio and create a passive source of revenue, while also building equity in real estate investments, then fractional ownership is the way to go. 

While residential real estate has been the best long-run investment in modern history, operational headaches and larger upfront financial commitments prevent many people from participating. At Vantage Horizon , our mission is to empower the world to build wealth through modern real estate investing on their own terms.

Now, you can buy shares of properites, earn rental income, and build equity through home appreciation, all while we handle the rest. Browse through available properties to start investing in real estate today. 

Buying an investment property can be one of your wisest financial decisions. Over time, property owners can realize significant appreciation and steady cash flow through passive income if they choose the right properties.

But how do you find investment properties for sale? When done correctly, finding and choosing the right property type for you can be time-consuming. But it doesn’t have to be. Here are some places you can start exploring today to get into the real estate market.

What you need to know before searching for investment properties

Spending hours scrolling through listings websites and dreaming about properties can be fun. But if you’re looking to buy, you can do so more efficiently if you know what you’re looking for. We’ve put together a guide to real estate investing that can help you clarify your short- and long-term goals. 

Here are some other things to consider before you set off on your search so you can make the process as efficient as possible.

Calculate how much of an investment you want to make

Be realistic: how much can you afford to put down for a down payment, and how much can you afford to pay for a mortgage? Don’t forget to factor property taxes, closing costs, and homeowners insurance into that total cost. Sites like Zillow can help prospective homebuyers estimate mortgage payments and additional monthly and annual expenses based on the expected purchase price, market value, estimated interest rates from lenders, and historical data about each property, such as property taxes and homeowners association (HOA) fees.

Decide what kind of real estate investment property you want to buy

Before you look for a property, you should know what you’re looking for and what your goal is. Do you want to enter the housing rental market, or are you more interested in developing land for commercial use? Are you looking for a long-term investment or a relatively quick cash return, as you might find from flipping houses? 

Think about the best real estate investment for you, so you can search listings more effectively and weed out properties that won’t work for you.

Know where you want to buy

Before you start getting too deep into the search process, research prospective property markets that interest you and understand what you want to get out of the investment. Maybe you’re a first-time investor, and you’ve only just started thinking about this because you’ve seen a great deal right in your neighborhood and are in a housing market you trust to continue growing. While that first “for sale” sign might not be the perfect option for you, you can use that as a starting point to research home prices and historical property values in your area and decide whether it’s the right place for you to invest. 

Or, maybe you’ve been reading a lot in the news about a specific market elsewhere in the country, and you’ve decided you want to invest there. You can then narrow your search criteria to that town and review options throughout the area, including options from crowdfunding platforms like Vantage Horizon, which enable you to realize gains from an investment property without having to front all the money for a down payment by yourself.

Make a plan to get the highest return on investment—and time

Knowing how you want to use a property can help you sift through options and rule out properties that won’t achieve those goals. For example, suppose you’re looking to capitalize on travel trends to get regular cash flow from a vacation rental. In that case, your timeline will look quite different if you’re buying a recently renovated house versus one that needs a lot of renovations. Many cities and towns have restrictions on how short-term rental properties can be used, so if you know you want to put a house on Airbnb, you can research those laws and see whether licensing fees and lodging taxes will eat up a significant portion of your gains. 

If you’re considering buying a single-family house,  consider the potential monthly rental income and whether it would balance out your mortgage. If you’re aiming for a multifamily home, think about whether you would want to live there yourself. Generally, you will have much lower taxes if you’re living in an owner-occupied multifamily house than if you live elsewhere and rent out every single unit. Also, know whether you’ll want to manage tenants yourself or if you’ll want to engage a property management company to find renters and deal with maintenance issues. While such companies can take a lot of the hassle out of owning a rental property, they can also cost a lot of money. 

Types of Places to Search for Investment Properties

Regardless of where you live, you can generally invest in real estate properties virtually anywhere. And lucky for you, there are scores of ways for prospective buyers like you to find a good investment even without first traveling to the place you’re looking to invest. 

Once you’ve made a budget, crafted a plan for the type of property you want to buy, and gained clarity on how you expect to realize ROI, you can start seriously looking for properties that make sense for your grand plans. 

Here’s where you can start your search for real estate investment properties.

Real estate investment crowdfunding platforms

One of the easiest ways to find investment properties with little administrative work on your part is to invest through a crowdfunding platform. Arrived, for example, collects investments of all sizes from investors to fund properties with high potential for long-term rental income and appreciation. The properties listed are all available for immediate investment, and you can invest with virtually any dollar amount you’re comfortable with, whether that’s a few hundred or tens of thousands. 

Fractional ownership enables you to find and invest in properties expected to start appreciating and generating rental income immediately. It takes all the admin work out of it for individual investors. Arrived’s team handles all necessary repairs, maintenance, and tenant relations—all you have to do is make your investment.

Auctions

When homeowners default on their mortgages and the property enters foreclosure, the lender generally sells the property at auction to the highest bidder. Legally, the lender is not allowed to profit from the sale, so any proceeds after the bank recoup its costs and cover any liens will go back to the homeowner.

Generally speaking, you will not have access to the property before buying it, and you may not even be able to see good pictures of the interior of the home. So, while such sales can often look like outstanding deals, there may be a lot of hidden work that needs to go into the house. 

You can find real estate agents through local property dealers, online listings that will connect you with an agent for viewings (such as by scheduling a viewing through Zillow), or through word of mouth. Ask around if you know anyone who has recently bought or sold an investment property to see if they would recommend the person they worked with.

Classified ads and ‘For Sale‘ signs

We all know Craigslist as the place to find new roommates and list stuff we don’t want. To be sure, there’s a lot of junk on there, but you might also find a gem of a listing for a home for sale by owner. You might find similar listings in local newspapers or town or city forums. 

You can also get lucky by driving through the neighborhood where you’re interested in investing. Particularly if someone is trying to sell a home on their own without the help of a real estate professional, they’re likely to post up signs in front of their house and potentially even around the neighborhood, such as on bulletin boards at cafes or in community centers.

Wholesalers

Wholesalers work with property owners to find buyers for their homes. They do this by contracting rights to purchase the property and then profiting by selling the house for a higher purchase price to the end user.

Earlier Last year, a Miami-based brokerage offered a new and exciting twist to a property sale. The buyer of the property, they said, would get a unique bonus as part of the purchase: a digital twin of the physical property. Inhouse Commercial partnered with Metaverse Group to develop a virtual version of the building, which went on sale as a package for $25 million. If all goes to plan, Inhouse’s deal will be the first commercial metaverse combo deal. 

However, Inhouse isn’t the only player in the digital real estate business. Sierra Development, a luxury home builder in Orlando, put a Miami mansion and its replica in the metaverse for sale for over eight figures and is hoping to do the same for the residential market.

Digital real estate has steadily been gaining momentum and traction recently, with several brands and commercial real estate companies looking into the opportunities this new format offers. For some, like Inhouse Commercial, the expectation is that investors who buy digital real estate will use it as a virtual meeting place for remote employees, while others are looking at it from a pure investment perspective. 

With real estate sales on the four major metaverse platforms reaching $501 million in 2021, is digital real estate something you should add to your real estate portfolio? Let’s take a closer look.

Buying and selling digital real estate

Digital real estate is a property that exists in online spaces, such as metaverses or virtual worlds. Also referred to as virtual real estate, digital real estate is a digital place for people to gather virtually, much like you would in a video game or online learning experience. Digital properties can take many forms, and examples of digital real estate include parcels of land, buildings, and avatars. Like with real-life spaces, the virtual property can rise or fall in price depending on demand, popularity, and location. 

Typically, a parcel of land in the metaverse is structured as a non-fungible token (NFT), which is stored in your crypto wallet and tracked on the blockchain. The NFT is a digital ledger that demonstrates proof of ownership of your digital land. There are several virtual platforms where real estate can be purchased, and theoretically, the amount of available land in each virtual world is finite. Much like in the real world, each land token has coordinates, and combining two or more adjacent parcels results in an estate. It’s helpful to think of the digital real estate market as programmable spaces in virtual reality platforms where property owners can overlay experiences or objects on land and create events. Visitors can socialize, attend meetings, attend virtual concerts, and so much more. 

Online real estate is typically bought and sold in the following ways: 

Metaverse land and property

This is the most common form of investing in digital real estate. Buyers can purchase land with a metaverse mortgage or through cryptocurrency like Ethereum. The land is bought in each metaverse’s primary marketplace; some transact exclusively in tokens specific to that platform or through secondary marketplaces such as OpenSea. There are currently 622,436 parcels of land in the ten largest metaverses, and $1.9 billion worth of land has been sold across the world’s top ten virtual platforms. 

Real estate NFTs

Another way real estate is being bought and sold digitally is through the use of real estate NFTs; real-world land and properties are being sold just as they always have, with the slight change that instead of dollars, the exchange is made through cryptocurrency. The contract is executed in the form of NFTs. Propy is a real estate management platform that allows brokers and property sellers to keep the entire transaction on the platform. They were responsible for the world’s first real estate NFT that sold for $650,000.

Digital versions of physical real estate

While still new, companies such as Parcl offer you the chance to buy and sell digital versions of real estate that track the actual price of real estate assets in specific locations. Like a tracker fund, you’d be investing in real estate assets in particular locations and earning based on the appreciation of value. However, this is all done digitally, through blockchain technology, which means there are no realtors and no commissions.

Online digital assets

While modern definitions of digital real estate investing almost always refer to transactions on the blockchain or assets in the metaverse, digital real estate can also refer to “online properties” such as websites, newsletters, and social media accounts that can grow in value over time and create passive income for their owners. Affiliate marketing through Amazon, selling ad space, digital products, apps, and e-commerce stores have traditionally been ways to generate income from these assets. It’s also increasingly common to sell domain names or get buyers for an existing online digital marketing business or a WordPress blog through platforms such as Flippa. Search engine optimization or SEO can make an online startup successful. 

How digital real estate investing works

If you’re looking to get started in digital real estate investing, here are a few things you should know: 

Platforms

There are currently a few leading platforms for digital real estate investing in the metaverse, the most popular of which include:

1. The Sandbox: This is one of the most popular and user-friendly of the current platforms. The platform is built on the Ethereum blockchain, and their in-game economy is powered by their token SAND and the crypto coin Ethereum. 
2. Decentraland: The development of this platform started in 2016 and was opened to the public in February 2020. Like Sandbox, Decentraland is built on the Ethereum blockchain and allows users to build gaming events and create and sell NFTs. This is considered the original metaverse project, and billions of dollars worth of virtual land have been sold on the platform. The native tokens are MANA and LAND.
3. Axie Infinity: Axie Infinity is one of the most successful play-to-earn games in Web3. 97% of NFT holders had three or more Axies in their possession, with the NFT collection surpassing $4 billion in sales volume. The native currency is AXS. This platform holds the record for the record-breaking sale of one parcel at $2.5 million.

Currency

To purchase land in the metaverse, you’ll need to get hold of some cryptocurrencies. Popular choices include:

1. Ethereum
2. SAND, the token connected with the metaverse platform The Sandbox
3. MANA, connected to Decentraland

Transaction

Purchases of land, properties, and assets in the metaverse are either made directly through the platforms themselves or secondary platforms such as Opensea and Non-Fungible, allowing sellers to list properties, set their prices, and connect with interested buyers. The sales and ownership transactions are recorded through NFT transfers. 

Start your real estate investing journey

Whether it’s physical or virtual, at Vantage, our mission is to give all investors, regardless of their experience level, the opportunity to take advantage of real estate investing. Our fractional real estate model takes the best from the physical and virtual worlds while giving you access to the hottest markets and prime locations in the real world. Earn the passive rental income without the hassle of being a landlord and with far less volatility than either digital real estate or the stock market. Look through our available properties  to get started.

Buying a rental property is a great way to generate passive income and diversify your investment portfolio. It may sound simple, but there’s much to consider before investing in a rental property. Here’s a quick guide to help get started.

Consider the Property’s Location

“Location is the most important factor in real estate,” according to Up homes because it greatly impacts a home’s long-term value. Why is location the most vital aspect to consider when purchasing a rental property? People love living near where they work and play, including your prospective renters. The location of your rental property will determine its desirability and demand in the market.

Here are three critical factors of an excellent rental property location:

• Population growth: It’s simple. A growing population leads to increasing demand for housing. When demand outweighs supply, it causes home values to go up and rent to increase. Savvy real estate investors look for markets where population growth forecasts are high, but housing is still relatively affordable. The reason? More significant potential to earn a good return on investment in the long run.
• Rental demand: When evaluating a potential investment property, it must be in an area with a strong rental market. What’s a strong rental market? Well, a third (34.5%) of Americans rent their own homes. A good rule of thumb is to look for properties in markets where more than a third of households are occupied by renters.
• Economic growth: A real estate market with a strong economy provides jobs and stability to the area’s residents. It’s also more likely to be a destination for internal migration, which helps fuel population growth – this, in turn, helps lay the foundation for an excellent real estate investment.

Assess the Property’s Income Potential

The second most crucial factor to consider when buying a rental property is the property’s income potential. Income potential is simply the likelihood that the property will generate income for you.

According to Investopedia, a quick way to assess a property’s potential rental income is to determine if it passes the 1% rule. It’s a quick real estate trick that helps determine whether a property is priced appropriately for the area’s rental market. For a property to pass, the monthly rent you can charge must be equal to or more than 1% of the purchase price. Let’s look at two “potential” properties below to see how the 1% rule works.

• Rental Property 1
• This three-bedroom, two-bathroom, single-family home is in a great location and priced at $175,000. Using the 1% rule, you should be able to charge at least $1,750 per month for rent. The average rent for similar houses in the area is $2,150 per month.
• Rental Property 2
• This two-bedroom, one-bathroom condo is in the heart of downtown and is priced at $250,000. Using the 1% rule, you should be able to charge at least $2,500 per month. The average rent in the area is $2,250.

In the example above, Rental Property 1 passes the 1% rule and would make a better potential investment. It allows you to charge more than 1% of the home’s purchase price for rent while remaining competitive in the market.

Finance the Rental Property

There are many ways to finance your investment property. Some options are:

• Traditional loan: A conventional loan or mortgage typically requires a 20% down payment; however, most lenders require a 30% down payment for investment properties. The lender will also use your credit score and history to determine your eligibility and interest rate. They’ll also review your income and assets to ensure you can make the minimum monthly payments. Traditional loans can be costly for real estate investors who don’t have the capital to put towards a down payment.
• Hard money loans: Unlike traditional loans, hard money loans that are secured by your personal assets, hard money loans are secured by the property. They’re a type of short-term loan that often comes with very high interest rates. As a result, hard money loans are typically used by property flippers who plan to renovate and resell the property in a short period.
• Personal loan: A personal loan is a type of unsecured loan. That means they aren’t tied to any assets you may have. As a result, large personal loans, like those needed to buy a rental property, can be difficult for individual real estate investors. Personal loans also have higher interest rates than traditional loans or mortgages.
• Crowdfunding: Crowdfunding is a way to raise small amounts of money from large numbers of people to pay for a project. At Vantage, we use crowdfunding and fractional real estate investing to help real estate investors enter the rental market without the hassle. That’s right! You don’t have to deal with real estate agents, lenders, or a mortgage. You also don’t have to deal with finding renters or monthly maintenance. Learn more about how vantage horizon works.

Lease the Rental Property

An empty rental property doesn’t generate any income for real estate investors. And a property that’s rented out without an air-tight lease poses a risk for property owners. Here’s some advice to help.

• Know your target tenant. The golden rule of marketing is “know your audience.” In real estate, it’s “know your tenants.” It helps ensure you’re marketing your property to the right people. For example, if you’re renting out a studio apartment near a university that’s $500 per month, it makes sense to market to students. Likewise, renting a single-family home in the suburbs with good schools, you’ll want to target families.
• List your property. Once you’ve identified your target tenant, it’s time to list your property. There are dozens of listing platforms out there. We recommend selecting ones that are more likely to be used by your target tenants.
• Make it legal. A leasing agreement is essential because it protects your property and helps ensure you generate consistent rental income. We recommend working with a lawyer to draft your leasing agreement. However, it should include the following: monthly rent and when it’s due, whether you allow pets, the upkeep required by tenants, and what happens if the lease is terminated early.

Manage the Rental Property

Property management is a rental property’s oversight, maintenance, and upkeep. It’s imperative because it helps protect your investment and ensure it’s operating at its full potential.

Property management includes:

• Listing the property
• Screening potential tenants
• Signing and renewing leases
• Collecting rent
• Maintenance and landscaping
• Budgeting for property maintenance
• Adhering to landlord-tenant laws

There are a couple of ways real estate investors can handle property management. First, they may choose to handle all of it themselves. Second, for a fee, they may hire a property management company to take it for them.

Feeling Overwhelmed?

Let us help. At Vantage, our goal is to make investing in real estate easy and hassle-free. We’ve created a radical way for investors to buy shares of properties, earn rental income, and build equity through home appreciation without dealing with real estate agents, lenders, or property management companie

The average U.S. household earns $84,352 a year and spends almost 35% of that on housing, according to the Consumer Expenditure Survey published by the U.S. Bureau of Labor Statistics. But what if you could generate enough extra income from your home to make your mortgage payment each month and put the excess cash towards other expenses, retirement, or financial independence goals?

With house hacking, you can. A relatively new concept that borrows from old-school traditions, house hacking is a way of using an existing property to reduce living expenses, build wealth, and get started in property management.

House hacking explained

House hacking is a way of generating rental income from your home, either through buying a multifamily property and renting out the units you don’t live in or renting out bedrooms, garages, attics, etc., in a house you already own. The goal of house hacking is to cover part or all of your housing costs, and if done very well, it could lead to purchasing more properties.

For home buyers without deep pockets, house hacking can work as an excellent real estate investing strategy that gets you started without any additional investment. Traditionally, being a house hacker has meant buying a multi-unit property—such as a two-unit duplex or a three-unit triplex— and living in one unit while renting out the others. Depending on the property, the monthly rent from the rental units can be enough for most, if not all, of the monthly mortgage payment. Essentially, house hacking allows you to live for free or almost free while also building an asset that will appreciate and give you consistent cash flow in the long term. 

3 primary benefits of house hacking

If free accommodation, passive income, and an increase in property value aren’t incentives enough, here are a few more benefits of house hacking that might make it worth looking into: 

1. Cheaper financing options

Financing a property as an owner-occupied primary residence has far more benefits than financing an investment property. For one, the down payments are much smaller (3-5% instead of 10-20%), and you can often get better loan fees and interest rates. Fannie Mae and Freddie Mac offer mortgage products for 2- to 4- unit primary residences with affordable down payments and low interest rates. This means lower monthly mortgage payments, higher cash flow, and an easier route to the housing market.

2. Easy start in real estate investing

House hacking is a quick and straightforward way to rent out units without investing in additional real estate. Not only can you minimize the amount of capital you have tied up in rental properties, but house hacking also allows people who don’t have much money to take advantage of the perks of real estate investing. Building equity in your home is faster since you have renters paying part or all of the mortgage. It’s also easy to learn how to become an effective landlord with your renters living right next door. 

3. Tax savings

As a homeowner, you get several tax advantages  from property ownership. However, when you purchase a home as a real estate investor or turn your property into multiple rental units, several additional tax breaks and benefits become available. Landlords can deduct expenses incurred to maintain the property. These include repairs, ongoing maintenance, and depreciation. You can also deduct the cost of owning and marketing it, which includes property taxes, mortgage interest, property management fees, property insurance, and the cost of finding renters. 

How to successfully hack a house

There are several ways to successfully hack homeownership that work for your finances, your life, and your family. You will, however, need to consider zoning laws and HOA (Homeowner Association) rules before proceeding. Here are a few house hacking strategies to consider: 

• If you own a multifamily home, you can turn one unit into your primary residence while renting out the rest.
• Convert a bedroom in a single-family home into a self-sufficient suite by adding a bathroom and kitchenette.
• Remodel a spare bedroom, a basement, or a garage and set it up as a short-term rental or vacation rental through Airbnb and Vrbo.
• Sharing your home with roommates can be an effective way to hack your house while saving up for a separate unit or remodeling. It does mean you’re sharing your living space with someone, but it can be an easy way to save up cash quickly.
• Build an accessory dwelling unit (ADU), which are separate living units that come with a home. Think basement apartments or detached garages. 

Buying a house to hack

As mentioned above, financing a primary residence is often much cheaper than financing an exclusively rental property. The interest rates are often low and down payments are affordable at 5% or less. Standard options for borrowers looking to finance or refinance a property include:

• Conventional loan: A conventional loan, offered by lenders such as banks or credit unions, is rarely guaranteed or insured by the federal government. The down payments can be as low as 3% of the purchase price, and interest rates, while low, can vary depending on your credit rating and history.
• Conforming loan: A conforming loan is a mortgage that meets the dollar limits set by the Federal Housing Finance Agency (FHFA) and the funding criteria of Freddie Mac and Fannie Mae. A conforming loan can be a good option if you have good credit, owing to its low interest rates. 
• FHA loan: These are loans backed by the Federal Housing Administration. They’re typically more flexible about credit score requirements than most other types of loans. 
• VA loan: For veterans, active-duty military members, and surviving spouses, VA loans can be a fantastic option. They don’t require a down payment or mortgage insurance.  

Start your real estate investing journey

Personal finance experts believe real estate to be one of the fastest and most reliable ways to build long-term wealth. House hacking can be an incredibly profitable way to use an asset you own to eliminate housing expenses and get started in real estate investing without having to purchase a rental property.

If you don’t own a property to house hack, however, don’t fret. Investing with Vantage Horizon allows you to take advantage of all the benefits of real estate investing and house hacking without owning anything upfront. Through our fractional real estate model, experienced and first-time investors can invest in exclusive properties that generate rental income.