Real estate investment is one of the dreamy yet surreal ways of becoming rich. It remains one of the most lucrative and financially pleasing investments to make. Being a landlord may be taxing, but its rewards are satisfying when done right.
While it seems complicated to get into property investment, the reality is the opposite. Getting started on real estate investment is easy, provided you arm yourself with some knowledge. Liaise with experienced investors or realtors and your financial advisor to get a complete picture of real estate. Here is a quick and easy guide to get your journey towards property investment started:
Ways to Grow Your Money Via Real Estate Investments
The basic knowledge or foundation of real estate is buying and selling of property. Selling your property can be changing ownership for direct cash or retaining property ownership but renting it out instead.
Rentals help you grow your wealth in different ways. Such ways include cash flow, which is profits after rent sorts out costs incurred, and real estate appreciation value. Real estate appreciation is the value of your property going up with time and changes you make for it. There are three types of rentals:
- Traditional rentals are the most common type of rentals. It’s when you rent out a property for a period of more than a year. An example is the VA-approved condo list.
- Vacation rentals are a growing trend of real estate, especially for beginners. Airbnb has grown to a global sensation overnight as a listing website for vacation rentals. Here you rent your property out to short-term guests for less than six months. Vacation rentals offer luxury and, as such, could make you more money than traditional rentals.
- Turnkey rentals are similar to traditional rentals, but you give up direct relation with the consumer. Here you relinquish property management to a company. It’s good for beginners who have no time or knowledge to run their properties.
Rentals are a popular and more stable way of building your wealth through property investment. However, it is not the only option.
Buy Real Estate Investment Trusts (REITs)
The rentals investment is a more hands-on experience for real estate investors. REITs involve investing in real estate without the pressures and activities of homeownership. They offer you a chance to grow your real estate portfolio and gain market exposure. Just like mutual funds, REITs are companies that use investor’s funds to purchase a property. Buying into one then ensures you get paid dividends, and you can also sell your REITs just like stock.
There are either traded or non-traded REITs. Investing in non-traded REITs through brokers is a more fulfilling and profitable experience.
Get into Flipping Investment Properties
Popularized by reality TV renovation programs, house flipping is a profitable way to make money in real estate. House flipping occurs when you buy an undervalued/cheap property and renovate or make changes to it. At this point, your newly fixed property is made for sale at a higher price. The final house price is determined after incorporating flipping costs and desired profits.
Flipping requires, however, to have a readily available market. The longer you own the house, the more mortgage payments and less profit for you. It’s vital to also estimate costs before investing in buying and renovating the house.
To start real estate investment, analyze which options suit your current financial state and match your investment goals. If you’ll need financing, applying for a mortgage loan is advisable. Whatever your purchase price is, save up at least 30% to assist you with down payment and property closing costs for when you finally own the property. Hire an experienced realtor to show you new tricks and advise you on your new investment and its market.