Have you considered investing in real estate but could not figure out how best to go about it? There is nothing to be bashful of if you have. There are different ways to invest in real estate, but it is vital to know which one fits you best. Some require more expertise and hands-on participation than others. Jumping into one that does not fit you could result in lots of heart aches and bitter lessons learned Consider the following methods of real estate investment and see which works best for you:
Long Term Rentals – this is an agelong method of real estate investment. It entails owning properties that are rented out for monthly cashflow. It could be as simple as renting out a room in your house, one part of your Duplex (or multifamily building) or renting out single family homes. The goal is to ensure the monthly rental income exceeds the operating cost – mortgage, insurance, maintenance etc. The net (rent minus expenses) is your profit. Over time, the equity accrued can be pulled out in “cash-out” refinance and used to expand your portfolio of assets. You can manage your properties yourself or pay a Property Management company to manage your properties for you. There are risks to this, like every other investment. You just have to do your best to mitigate them; for example, screening your tenants.
Short Term Rentals – do you own a property that you seldom use and want to maintain some flexibility of usage without having it stay vacant for lengthy periods when you are not using it? Short term rentals (STR) offer you a way to eat your cake and still have it, in this instance. STR allow you generate income from your property by renting it to people who only need to stay in it for a short period of time. Entities such as Airbnb have made it possible for people to invest in short term rentals with minimal marketing hassles. While you may list it on platforms such as Airbnb, you have to work out granting access to renters, cleaning up between renters and other required maintenance. You can pay a Property Manager to this for you. Investors that are savvy enough, lease properties in lucrative markets, then use them for STR. Make sure the terms of your lease allow you to use the property for STR if you want to take this path.
House Flipping – quite often, when people think of real estate investment, house flipping comes to mind; perhaps due to all the TV shows and glamor that goes into them. This method of real estate investment is better suited for people who are well experienced in rehabbing properties. It entails buying a property that needs some work (preferably at a discounted price), fixing it up and selling it for profit. You need to have both time and financial resources to either do it yourself or oversee contractors rehabbing the property to your specifications. Experienced and savvy investors in this field are able to leverage other people’s money to fund these deals. Be careful, though, this is not for the faint hearted; it is not as glamorous as it looks on TV.
Real Estate Investment Trusts – do you want a portfolio of real estate assets without the headache of managing them? A Real Estate Investment Trust (REIT) is ideal for you. REITs are like dividend stocks. The corporation is required, by law, to pay out 90% of its taxable income in the form of dividends to investors. Since these are publicly traded trusts, you can buy and sell your shares at your convenience.
The above are not an all-inclusive list of real estate investment methods. These, however, are more traditional. So, are you a hands-on type with lots of time in your hands, do you simply have capital to invest but no time to go about things in a hands-on manner or are you somewhere in the middle? One of the above-mentioned methods should fit your investment style and get you started.
Other Resources:
5 Simple Ways to Invest in Real Estate (investopedia.com)
How to Invest in Real Estate: 5 Ways to Get Started – NerdWallet
