I want to diversify my investments and boost my net worth, so I'm taking 4 steps to begin investing in real estate
Investing in real estate might seem complicated, but there are vehicles like real estate investment trusts (REITs) that make the process simpler.
Jen Glantz
- A few years ago I got serious about investing, but I was mostly focused on stocks and index funds.
- I've recently decided that I want invest in real estate, but I need to learn more before I begin.
- I'm looking at options like REITs, understanding how to diversify, and starting with small amounts.
- Read more from Personal Finance Insider.
I spent my 20s making so many money mistakes. I had credit card debt, little savings, and thought the idea of a 401(k) was a waste of time and money.
After I turned 30, I promised myself that I'd focus on my personal finances more than I ever have before. Not only did I want to get serious about funding my retirement accounts, but I also wanted to start investing in different assets so that I could grow my overall net worth.
For the past few years, I focused on investing my money in individual stocks, index funds, and in my SEP IRA. In 2022, my goal is to start investing in real estate too, through real estate investment trust (REITs) and by buying shares in real estate projects through platforms like
1. Finding out more about the different options
I used to think that the only way you could put money into real estate was to buy your own property. Since that's not something I'm interested in doing right now, I wanted to learn about other options out there. That's when I discovered there are many different ways you can add real estate investments to your portfolio.
For example, I'm looking into investing in REITs, which are companies that own real estate properties — usually commercial real estate — and REIT index funds, which are mutual funds that passively invest in a benchmark real estate index, or offer the opportunity to buy shares in existing real estate properties.
My first step is to spend a week or two doing a deep dive into each of those options, researching the pros and cons, speaking to people who have invested in each type, and talking to financial advisors.
2. Understanding how to diversify my portfolio
Right now, most of my investments are in stocks and bonds that focus on more general companies.
Adding real estate to my investment portfolio will allow me to diversify what I'm putting my money into, and over the next 15 to 20 years it will not only help me even out risk — since I'm not putting all my money behind just one type of investment — but also potentially grow my net worth.
3. Determining how much cash I'm willing to start with
When I first started learning about investing in the stock market, I allowed myself to invest just $1,000 into a few individual stocks. This helped me get started, figure out what I was doing, and not take on too much financial risk. Once I felt more confident with an investment strategy, I put more money in the market.
I want to do the same with real estate. I plan to take inventory on my financial portfolio and determine how much cash I'm willing to invest in different real estate opportunities. Since I'm new to this kind of investment, I plan to start with just $2,000 until I have a better understanding of what the best course of action is for my portfolio.
4. Making my first investment official
Since I want to mitigate risk as much as possible, I'm likely going to begin my real estate investing journey by putting a small amount of cash in a real estate index fund.
One that I'm looking into more is the Vanguard Real Estate Index Fund Admiral Shares (VGSLX) is made up of companies that purchase office buildings, hotels, and other real estate properties.
Doing this will help me have exposure to real estate without taking on immense risk or putting a bigger chunk of my money into a property that I fully own.