When United Handyman Association founder Flash Shelton found squatters in his mother’s home, the only way he could get rid of her unwanted guests — after local police said they couldn’t help — was to out-squat the squatters.
“I called local law enforcement and as soon as they saw there was furniture in the house, they said I had a squatter situation, they had basically no jurisdiction and they couldn’t do anything,” Shelton told Fox Business’ Stuart Varney. “So, I dissected the laws over a weekend and basically figured out that until there’s civil action, the squatters didn’t have any rights, so if I could switch places with them and become the squatter myself, I would assume those squatter rights.”
He had his mom write up a lease for him and got it notarized, he staked out the home early one morning, waiting for the squatters to leave. When they did eventually leave, Shelton entered the property, put up cameras and waited for them to return.
Shelton’s scheme worked and the squatters left — but not without putting him in a potentially dangerous situation.
Dealing with squatters, or even tenants, can get complicated and costly. Thankfully, there are safer and easier ways to make your mark in real estate.
A squatter is someone who inhabits a piece of land or a building that they have no legal right to occupy — and without paying rent.
According to the American Apartment Owners Association (AAOA), most states have laws that give squatters rights to inhabit a property “in the event that the lawful owner does not evict or take action against,” them and they differ from state to state. Those laws typically only apply if the squatter has been illegitimately occupying a space for a specific period of time — after which, they will have gained “adverse possession,” and local law enforcement won’t be of much help.
Squatters should not be confused with trespassers. A blog post on the AAOA site explains: “A trespasser breaks into the property through an illegal entry and doesn’t have utilities, furniture or any form of a prior lease. Due to this, trespassers can be removed for violation of local loitering or trespassing laws.”
“I feel bad I can’t help everyone,” said Shelton in the FOX Business interview, who is now running a service to help other property owners deal with squatters. “I’m trying to change the laws.”
That being said, it’s never advisable to take the law into your own hands, especially in a heated situation like an eviction. If the risk of serial squatters and the other trials and tribulations of being a landlord don’t appeal to you, here are three ways you can invest in real estate without all the hassle.
Investing in a real estate investment trust (REIT) is a way to profit from the real estate market without having to buy a house or worry about screening tenants, fixing damages, chasing down late payments or even facing trespassers.
REITs are publicly traded companies that own income-producing real estate like apartment buildings, shopping centers and office towers. They collect rent from tenants and pass that rent to shareholders in the form of regular dividend payments.
Essentially, REITs are giant landlords. To qualify as an REIT, a company must pay out at least 90% of its taxable income to shareholders as dividends each year, in addition to other requirements. In exchange, they pay little to no income tax at the corporate level.
Generally, REITs are described as high-return investments that provide solid dividends and the potential for moderate, long-term capital appreciation.
Also, as REITs are publicly traded, you can buy or sell shares any time and your investment can be as little or as large as you want — unlike buying a house, which usually requires a hefty down payment followed by a mortgage.
Read more: Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here’s how
Real estate ETFs
Another easy way to invest in real estate without having to pick and choose which stocks to buy and sell is through exchange-traded funds (ETFs).
And as the name suggests, ETFs trade on major exchanges, making them convenient to buy and sell. Some ETFs passively track an index, while others are actively managed. They all charge a fee — referred to as the management expense ratio — in exchange for managing the fund.
The Vanguard Real Estate ETF (VNQ), for example, provides investors with broad exposure to U.S. REITs. The fund currently holds 164 stocks with total net assets of $64.2 billion. Over the past 10 years, VNQ’s net asset value (NAV) has grown 5.5%. Its management expense ratio is 0.12%.
Another example is the Real Estate Select Sector SPDR Fund (XLRE), which aims to replicate the real estate sector of the S&P 500 Index. It currently has 31 holdings and an expense ratio of 0.10%. Since the fund’s inception in October 2015, XLRE’s NAV has grown 6.64%.
Both of these ETFs pay quarterly distributions.
If you’re an experienced investor looking to up your stake in real estate, there are also options for accredited investors that often have higher minimum investments that can reach tens of thousands of dollars or more.
If you’re not an accredited investor, many platforms allow you to invest smaller sums, even as low as $100.
These online platforms make real estate investing more accessible by simplifying the process and lowering the barrier to entry.
Sponsors of crowdfunded real estate deals usually charge fees to investors — typically in the range of 0.5% to 2.5% of whatever you’ve invested.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.