Investing in real estate can be a lucrative way to increase your income and diversify your portfolio. Although it may sound like an expensive investment, the barrier to entry can be much more affordable than you think. Not to mention, the benefits of real estate investment outweigh the drawbacks, even in times of a down market. If you are new to property investment and are not quite sure where to start, read more below.
Ways to Invest in Real Estate
There are many ways to invest in real estate, allowing people to generate an additional income stream. Most often, new investors do not know how or where to invest when it comes to real estate. Below we will discuss some of the ways to invest in the real estate market.
Investing in Real Estate to Flip the Property
Buying a home or small apartment complex with the sole intent of fixing it up to flip for a profit is a popular way to invest in real estate. This type of investment is generally for individuals that have extensive experience with real estate valuation, renovation, and marketing. An experienced house flipper generally is looking for a property that is undervalued to fix and sell for a profit. This is usually done to renovate and sell as quickly as possible.
For individuals that are just starting and want to try their hand at flipping a house, be diligent and have a plan. The plan should include all the minute details of the project from start to finish to help you stay on time and within budget. Some individuals that have an extended timeline, may want to consider living in the property as they are fixing it up. This can help to reduce the cost of additional living expenses or multiple mortgages.
When looking for an investment property to purchase, in many cases, some of the best deals occur when a person looks into foreclosures in the area that they want to purchase property in. There are usually some great deals to be had on a foreclosed home, however, the extent of repairs needed may be more extensive. On a foreclosure, the property is purchased as is and will generally require more sweat equity to make the property livable to rent out or to sell the property for top dollar.
Purchasing homes or a multi-plex for the sole purpose of renting them out is a great stream of income. And some flippers find themselves in a situation where they have not been able to sell their investment property so end up renting the property. If the goal is to purchase the property as a rental, some strategies can be used to continue acquiring properties by using the equity in their rental properties to purchase additional property. Being a landlord doesn’t have to be difficult or time-consuming. Many landlords opt to use a property management company to care for their property while they focus on acquiring more properties. Another option would be to purchase an entire portfolio of properties vs purchasing property one at a time. Of course, this will depend on the amount of money available to invest.
Land Only Property Investments
Some people like to invest in real estate with the purchase of land. Depending on the market, the amount of land available may be limited and the price high. The great thing about land is that it doesn’t depreciate even though it is a tangible fixed asset. Depending on the overall goal, some individuals build on the land they purchase while others may rent the property to be farmed, rented for hunting, or they may leave it as it is for future development. Regardless of plans, it is important to ensure the care of the property.
Investing in Developing Land
Other people buy land with the sole purpose of developing the property as a housing addition or for apartments. This strategy is not generally used by individuals unless they have extensive experience. Most often a developer or developer group will purchase large tracts of land to build out the land in phases. The phases could include anything from a neighborhood with homes or apartments, grocery stores, and any other amenities needed for a completely self-sufficient community. This is not generally an option for individuals that are brand new to the property game, however, it is possible to invest with a real estate investment group with a more hands-off approach.
Benefits of Investing in Real Estate
Investing in real estate has been considered one of the most lucrative investments of all time and has a great number of benefits.
- Allows you to build equity and build wealth.
- Creates passive income.
- Helps diversify your portfolio.
- Provides a consistent cash flow as long as the property is rented.
- Tax Breaks.
- Leverage for capital.
- Property appreciation.
- Inflation hedging.
Finding Capital to Invest in Property
The most common way to get capital for investing in real estate is to apply for a mortgage loan. When applying for a mortgage it is important to shop around for the best programs and interest rates that are specific to the use of the property. A mortgage for a primary home may have different rules as well as down payments than a mortgage for a property that is going to be flipped or rented out.
There are many different types of mortgages and lenders so doing your research is important. If you are in a situation where you can pay outright for the property that may be an option as well, however, may not be the best option in that you want your money to work for you, and having a mortgage isn’t a bad thing. Having a mortgage can help to increase your credit score and helps to keep money in your pocket for improvements to your property. If you have a larger amount of money to invest, taking on a mortgage may allow you to purchase multiple properties as well.
Managing Your Real Estate Property
Real estate can be a great investment with the potential of a steady income stream. Having a plan to purchase real estate, as well as a plan on managing your real estate should be done well in advance of buying a property. It may sound like a great idea to manage your property on your own, however many factors need to be considered. If you like the idea of acquiring property but don’t necessarily want the hassle of the upkeep or renting the property, consider hiring an experienced property management company.
When you hire a property management company, you add value to your real estate investments. At Real Property Management Consultants, we have over 30 years of full-service residential property management experience. Our services include everything from vetting tenants and renting your property to upkeep and maintenance. Not to mention we help to eliminate the stress and time constraints that are often associated with investing in real estate and being a landlord. For more information on how we can increase your bottom line, contact Real Property Management Consultants today. Our friendly staff is here to help.
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