Investing in real estate and becoming a landlord has been a reliable wealth-building strategy for centuries. With the rapid growth of technology and the recent surge in home prices following the government-imposed lockdowns of 2022, it is now more important than ever to explore innovative ways to invest in real estate. This article will discuss four paths to becoming a landlord, including traditional methods and new opportunities in the digital era, while adhering to applicable securities regulations.
House Hacking
House hacking is a strategy that involves purchasing a property, typically a multi-unit dwelling, and renting out part of the property while residing in one of the units. This allows the owner to build equity while the tenants cover the mortgage payments. To successfully house hack, one should consider the following steps:
- Understand financing options: Consult banks or credit unions for loans if you cannot finance the primary residence.
- Choose the right property: Take into account factors such as neighborhood, property tax rates, crime rates, house price index, and rent growth to find a desirable property.
- Analyze the numbers: Calculate the potential income from the property to ensure that rental income covers mortgage payments and maintenance costs.
- Track income and expenses: Develop an efficient system for monitoring income and expenses, as rental-related expenses are tax-deductible.
- Conduct repairs and renovations: Improve the space to make it habitable and attractive for tenants.
- Find tenants: Advertise and screen prospective tenants while complying with the Fair Housing Act and other landlord-tenant laws.
Real Estate Investment Trusts (REITs)
REITs are companies that enable investors to invest in large-scale, income-producing real estate. By investing in REITs, individuals can earn dividends from real estate without the need to manage or purchase properties. The three main types of REITs include:
- Mortgage REITs: These REITs lend money to real estate owners or operators through loans, mortgages, and mortgage-backed securities.
- Equity REITs: These REITs primarily earn income through rents by owning and managing income-generating real estate.
- Hybrid REITs: These REITs combine both equity and mortgage REIT investment strategies.
- Individual investors can invest in publicly traded, publicly non-traded, or private REITs, depending on their preference for liquidity and exposure to market fluctuations. REITs must adhere to specific regulations outlined in the International Revenue Code (IRC) to qualify as a REIT.
Airbnb
Airbnb is an online platform that allows homeowners to rent out their homes or rooms to travelers for short-term stays. By listing a property on Airbnb, individuals can generate income as landlords without owning multiple properties. To become a landlord through Airbnb, consider these steps:
- Evaluate your space: Determine if your property is suitable for guests and familiarize yourself with local laws and taxes.
- Prepare the space: Create an inviting atmosphere with unique décor, basic amenities, and thoughtful touches.
- List your space: Add a captivating description and high-quality photos to attract guests.
- Set hosting preferences: Define check-in/check-out times, minimum/maximum stays, house rules, and availability.
- Price your listing: Research local market rates and consider factors such as location, amenities, and seasonal demand to set a competitive price.
United States Property Coin (USP)
A novel approach to becoming a landlord involves leveraging blockchain technology through the United States Property Coin (USP). Though it may seem unconventional, blockchain technology enables investors to participate in the real estate market using the USP security token.
USP is a digital security backed by Primior, a real estate management company with a successful track record of developing over $1 billion worth of real estate projects. Utilizing institutional-grade blockchain technology, USP is designed to adhere to all applicable securities laws and regulations.
The USP token employs a fractional ownership model, allowing investors to acquire portions of real estate properties. Real estate has long been considered a sound investment, and as such, USP investments have the potential to appreciate in value alongside the underlying real estate assets they represent.
Since its inception, USP has secured a seed asset in the form of a $10 million luxury multifamily property in California. When you invest in USP, you gain fractional ownership of real estate assets, effectively making you a landlord. However, unlike traditional landlords, USP owners are not burdened with the responsibilities associated with property leasing, such as tenant management and maintenance.
As a USP investor, you can benefit from both rental income and potential asset appreciation without the challenges of managing a rental property.
Becoming a Landlord Using USP Security Tokens
Embracing tokenization as a path to becoming a landlord is more straightforward than it may seem. The rental property is divided into affordable portions, each represented by tokens with different values stored in decentralized databases.
These decentralized digital databases, or blockchains, maintain critical information about the property. The blockchain’s security features ensure that the information cannot be altered, thereby enhancing the safety and trustworthiness of the investment.
To acquire property using USP, follow these steps:
- Step 1: Purchase USP tokens. It is important to note that the offer and sale of USP must comply with all relevant conditions of Rule 506 if the purchaser is a US citizen. USP is only available for sale to accredited investors under Rule 506(c) of Regulation D.
- Step 2: Upon claiming ownership of the tokenized rental property through USP, you will become a fractional landlord as you will own a piece of the company that owns the real estate assets underlying the token.
Investing in USP has gained popularity as a means of becoming a landlord due to its low entry barrier, flexibility, and lack of geographical limitations. By eliminating the complexities associated with traditional real estate investments, USP offers an innovative and accessible way for investors to enter the real estate market.
Becoming a landlord can be a rewarding endeavor with various paths available to suit different investment goals and risk tolerance. From house hacking and Real Estate Investment Trusts (REITs) to Airbnb and United States Property Coin (USP), these approaches offer unique opportunities to generate wealth through real estate investments. By carefully considering your financial situation and understanding the associated risks and regulations, you can make informed decisions to achieve your desired investment objectives.
