Investing In Real Estate

Let's assume a home in 2012 is purchased for $300,000, and the buyer puts down $30,000. According to information released by the Federal Housing Finance Agency, the house price index (HPI) for the average home rose by 16.025 percent through the second quarter of 2015. That means the home purchased in 2012 was worth in the area of $348,000 by 2015!

That's an increase of $48,000 over three years, with an initial investment of just $30,000. Is there any wonder that people are interested in real estate? A 160% return on investment has many people looking for real estate opportunities beyond just owning a home.

For a deeper analysis, you can use our rental property wealth calculator.

Given the fact being a landlord is a big commitment, the below list describes some of the ways it's possible to purchase real estate properties for investment purposes:

• Bankruptcy Properties: acquiring property from sellers that have gone into bankruptcy.

• Tax Lien Investing: acquiring a property from an owner that has not paid their property taxes.

• Foreclosure: purchasing real estate as part of a foreclosure proceeding.

• Unknown Owners: acquiring the property from local tax authorities when the heir to the home cannot be located.

No doubt it's difficult to own real estate properties on a part time basis. It involves a lot of research, speaking to county clerks, and attending sheriff sales. Most of these activities need to take place during normal work hours on weekdays, not weekends.

Note: You can also find many real estate investing opportunities via platforms like Crowdstreet or Yieldstreet — we also compare the two major investment platforms here to help you make a better decision.

A real estate investment trust, or REIT, is a trust that is set up for the sole purpose of investing in real estate. These trusts are typically run by a board of directors that provide oversight into the purchase of investment properties. A REIT offers the investor advantages that include:

• Professional property management services necessary to run and maintain the properties.

• Oversight of purchases to ensure investment dollars are used wisely.

• Diversification of purchases beyond single and multifamily dwellings.

REITS can invest in multifamily dwellings, commercial office space, hotels, and shopping malls. Earnings on these investments come from the sales of the properties themselves, efficiencies gained through changes to operations, and rehabilitation of properties to improve their marketability. The topic of REITS is discussed in more detail in our article: Real Estate Investment.

Read More: Careers in Real Estate Investment Trusts

Another way the average investor can participate in the real estate market, and rely on professional management services, is through the purchase of specialized mutual funds. These funds typically invest in real estate investment trusts as well as real estate companies. The latter category would include large builders or owners / operators of properties such as Hovnanian Enterprises and Toll Brothers.

Like all forms of mutual funds, they offer the investor the advantage of diversification and liquidity. Typically, investors can buy into a mutual fund with as little as $2,500. Our article entitled Real Estate Mutual Funds provides some additional guidance in addition to a list of the top performing funds. This brings us to our final point.

According to Morningstar, real estate mutual funds have enjoyed above average returns in the past. It's an individual decision as to whether or not this success will occur in the future. However, most analysts agree that real estate investments should play an important role in any long term investment portfolio.