You may have heard that investing in real estate is a fantastic way to not only build your investment portfolio, but also to make some good money. If you want an investment that you can count on for your future, real estate is it. The beauty of this path is that there are numerous options available, not one of them better than the other. The choice is up to you!
So, you’re interested, but don’t know what kind of investment to move forward with. Here are a few options worth exploring.
Did you know that owning your own home counts as real estate investing? For many, it is the first step to really getting into real estate. As long as you keep current on your mortage payments, taxes, and insurance, you are building a solid investment that is likely to pay off in the long term. It's suggested that you pay off your own home before you move forward in real estate investments. Once you've done this, you have quite an asset on your hands.
When someone says “real estate investment” this is one of the first places your mind usually turns to. In other words, residential real estate. This is a good option if you’re in it for the long haul. With this path, you’ll purchase a property, fix it up if necessary, and rent it out to tenants. People are always looking for apartments and houses to rent out, so as long as your property is nice and priced at a decent monthly price, you’re likely to have it occupied most of the year.
You’ll receive monthly checks from tenants, which ensures that there’s always a continuous flow of income coming in your door! If you do it right, your tenants will pay for your monthly mortgage and more. However, be warned: you’ll need to do some work in order to earn this. Things break, maintenance needs to be done, and sometimes checks don’t come in on time. You’ll need to monitor all these issues and either fix them yourself or pay someone else to solve them. Depending on how often these issues arise, you may be spending more than you’re earning. An older property is more likely to incur more expenses, so be wary of that when deciding which property is best for you.
If you can do all of this successfully, your property will increase in value over time, and you’ll be able to rent it out for even more money. Or, at the very least, you’ll have built up your credit paying off the mortgage with the help of your tenants.
Ever since the rise in popularity of HGTV’s home flipping shows, this way to invest is all the rage. This path is similar to the rental property track, except you’ll likely be doing much more renovations with the intent of selling it once it’s finished. It’s definitely not easy, but it can earn you quite a bit of income if done right.
You’ll need to be sure to have a handful of trustworthy, knowledgeable people on your side if you plan to pursue house flipping. Time and money can be wasted on contractors who don’t know what they’re doing or are in it to scam you. It’s also crucial to know what the most important big ticket items are in a home, therefore, when things start adding up fast, you can make an informed decision.
If you don’t have this insider knowledge, be sure to surround yourself with people who do. You definitely cannot DIY everything unless you want to risk losing money and upsetting potential buyers.
Even with the risks, this can really make you a good amount of money if you’re successful and wise in your decision making.
Vacation rentals have become more popular over these last few years, and are a business that anyone can get into fairly easily. Do you have a spare room that you find yourself never using? Is there a roomy shed in the backyard that you could transform into an oasis? Or are you looking to move, but don’t want to let go of your current home yet? Then a short-term rental may be a great idea for you.
In this path, you don’t have to worry about constantly managing tenants and providing constant upkeep of your property. Instead, you can list it when it’s available and keep it unlisted when it’s not. Websites like Airbnb and VRBO make it incredibly easy to list your property and make sure it’s seen by the right people.
The biggest things you’ll need to worry about are cleaning and advertising your rental. In this age of the COVID-19 pandemic, when traveling, people are opting to stay in short-term rentals instead of hotel rooms. This works towards your benefit. You can market your space to those wishing to be as safe as possible, and provide them with the comforts of frequent cleaning and keeping them distant from others.
This option is low-cost, as you already have your space available. The median range of a nightly stay is $75-150, so you can make quite a bit of money if your space is appealing enough to travelers!
Investing in Land
If you have a grand vision for a venture involving real estate, investing in land may be the way to go. This is a more DIY path, as obviously there is no blueprint all ready to go for you on that space.
The initial purchase of the land will be cheaper than buying an already established property, but it will require a lot more thought, investment, and strategy than other options. You’ll need to be wise in the way you go about building the plan for your land, as funds will need to be allocated properly.
Just like with flipping a house, be sure to have professionals on your side. It will be important to work with an architect when deciding how to proceed, as they have knowledge on building codes and important information that is specific to your state.
Getting permits approved, among other things, can make this process take quite a bit of time. You can choose to divide the land into sections and sell or rent those divisions as they become ready. Another option is to sell the finished product, or make it your new business venture.
This ultimately may be one of the costlier real estate investment options, depending on what you do with it. But, you could end up building something wonderful that brings in a profit and is valuable for your community.
Be a Lender or Crowdfunder
You don't have to buy and manage land, a property, or tenants in order to invest in real estate! In fact, you can help someone else do it.
When you are a lender, the borrower will make debt payments to you and the other financers. Oftentimes, this will give you more income than an equity investment, and you won't have to worry about making repairs, cleaning, or dealing with renters or home sellers. Another thing to note is that you will recieve your money back before equity investors if the venture doesn't turn out as planned.
As an investor in a crowdfunding project, you can help raise capital for real estate developers. In exchange, you get an equity interest in the project. CrowdStreet is a great place to find opportunites like this. The return on your investment can be massive, so that's why this is a popular choice in real estate investing! The downside is that you'll have trouble getting any of your money back before the project is complete, so keep that in mind.
Real Estate Investing is Wise
No matter what way of investing in real estate you decide to pursue, it is a profitable and exciting way to secure your financial future. These days, there are so many different ways to invest -- and some of them, you don’t need to even leave your home in order to do. Real Estate Investment Groups, Real Estate Investment Trusts, and Online Real Estate Investment Platforms are other options you can pursue outside of the ones listed above.
Just remember, you will need to take taxes into account when making these financial decisions. Come April, you'll need to bring along a little bit more paperwork to your tax appointment. Consider hiring an accountant if you're worried or confused about how your taxes will change with real estate investing under your belt. They will help you prepare and give you guidance on how much you should be putting away for safe keeping.
Need a little more information on real estate investing? Check out our last blog post on why securing a real estate mentor is a great idea, as well as our mentorship program!