Thinking about investing? Most people immediately jump to and think about stocks or bonds—and for good reason. Investing in stocks or bonds is a great investment, but there are other ways to invest, including real estate.
Although it seems like a very complex transaction, Investing in real estate can be one of the most lucrative investments you can make. And while it can be risky, it can also provide you with a stable income stream and help you build wealth over time.
Investing in real estate can come in different shapes and sizes—but it’s important to understand and weigh your options first before you make a decision. Here are four options to help you make smart decisions when investing in real estate:
Becoming A Landlord
Buying a residential rental property is a classic way to invest in real estate, you can either buy a single-family home and rent it, or you can buy an apartment building and rent out the apartments in it. Renting out apartment buildings may generate higher returns on your investment if you have the capital for it—though it also requires more time and expertise.
Buying properties for income generation is fairly easy to do nowadays, you can go into the various real estate sites and look for vacant properties primed for income generation.
House flipping is another way of investing in real estate. You buy a house, ideally one in distress, improve or upgrade it to increase the value of the property, and then sell it quickly. It’s ideal for investors who want to get their ROI faster. Depending on the work that you have to do, in a few months, you will be able to list the house on the market and get your profit.
However, House Flipping poses a lot of risk to the investor. To make a hefty profit it’s all about doing the math. You have to factor in the cost of your purchase, and a close to the accurate cost of how long it would take to fix up the property. There is also the risk of the house being on the market for too long, the less money you make because you’re paying a mortgage without bringing in any income.
House hacking means finding ways to generate income from your home. Traditionally, house hacking meant buying a multifamily property, living in one unit, and renting out the others so that the tenants pay the owner’s mortgage, and the owner builds equity while maintaining the property.
But now house hacking has evolved into something more – it’s become a lifestyle choice for people who want to live in high-rise buildings or downtown areas without being tethered to a 30-year mortgage. It also makes sense for people who are downsizing from larger homes but still want space to entertain.
These new types of house hackers don’t mind paying extra rent for amenities such as parking spaces or storage lockers because they value having them nearby rather than having to rent storage units or drive around looking for parking spots on the street. They also don’t mind paying extra rent if it means they can live near work or in downtown areas where they enjoy going out.
Real Estate Investment Trusts
Investing in REITs is simple and is ideal for people who want to be able to invest in real estate. Real estate investment trusts (REITs) are companies that purchase, own, and operate different types of real estate. The most common type of properties that REITs have are residential rental homes, student housing, and commercial properties.
Shares of publicly-traded REITs can be bought similar to how stocks are bought and traded. You can get a return on your investment from REIT as long as you’re invested in it, but it depends on how much ‘stock’ you bought.
One of the nice things about investing in a REIT is that they are required to pay out 90% of their income as dividends to their investors.
Not everyone has the goal of ultimately owning real estate as an investment. Most homeowners tend to stop their real estate journey after buying their own homes. Real Estate Investing may not be for everyone, but everyone can certainly get in on it. Investing in real estate can come in different shapes and sizes, so it’s important to understand and weigh your options first before you make a decision.