When it comes to investing, real estate investing has several advantages. However, there are some drawbacks to traditional real estate investing. For instance, if you have your cash tied up in properties, then it’s illiquid. If you need access to that cash, you’ll need to sell one or more assets to liquify and move your money elsewhere. Online real estate investing has a few more advantages.
5 Benefits to Online Real Estate Investing
Here are five tangible and distinct benefits to investing in real estate online:
1. No overhead – First among the benefits to investing in real estate online is that you don’t need any overhead to get started or to maintain your business. Unlike many traditional businesses, you can operate as a real estate investor out of your own home no matter where you live. Many real estate investors operate as nomads and move around from place to place. In today’s connected world, that’s much easier than ever before. You can search for properties online with your laptop on the move and never maintain a brick-and-mortar office.
2. No inventory – With traditional real estate, you have to hold inventory. Whether you are a buy-and-hold investor or a fix-and-flip investor, as long as you have real estate in your name, you have inventory. With online real estate investing, you can reap many of the same rewards from your investments as with traditional real estate investing but you don’t have to hold inventory. That’s because you can invest in REITs or buy shares in real estate investments that allow you to earn passive income without all the hassle of direct ownership.
3. No employees – Real estate investing is one of the few businesses you can start and maintain without ever needing employees. You can search for your own properties, buy them, and even fix them up yourself if you have the skills. With online real estate purchases, you often are buying shares in a property or lending money to the developer and there is hardly any need to hire a staff unless your business grows large enough to require it.
4. Tax advantages – Online real estate investing provides almost all of the same tax benefits as traditional real estate investing. You can use 1031 exchanges and buy and sell properties with your IRA. Consult your tax advisor for the best ways to minimize your tax burden with online real estate investing.
5. Neglible cash requirements – Traditional real estate investing requires that you keep enough cash reserves for earning money, closing costs, and down payments. With online real estate, however, those obligations aren’t always necessary. You can earn passive income by lending money to developers and fix-and-flip investors without owning property or holding title to any of your investments. You can also invest in specific real estate deals as if buying shares in a company, so the need to hold large piles of cash for property acquisition and development isn’t necessary.
Other Names for Online Real Estate Investing
Online real estate investing has many names. You’ll often hear it referred to as real estate crowdfunding, or marketplace lending. Whether you’re interested in buying equity in real estate or investing in debt-based deals, online real estate investing has many advantages over traditional real estate and other investment vehicles.