While investing in real estate might not be the most exciting investment, it is a smart investment strategy to build wealth and generate passive income. Not only that, but real estate generally appreciates over time, so as long as you are in it for the long haul, it’s a stable and potentially lucrative investment.
Are you interested but not sure where to start? We’re here to help. Read on to learn about some of the best ways to invest in real estate.
1. Rental Properties
This is the most common way to invest in real estate and is the most effective. You can start small, with a single-family home, townhome, or condo, and move on to multi-unit properties or simply acquire more rentals to add to your portfolio.
Before buying, you should research whether the property will provide a return for your investment. This is typically easy to do by examining the rental history, rent amount, and whether the current tenants will stay with the property.
Once you purchase a rental property, you can become hands-off, if you want, and turn over the day-to-day management to a property management company. You can even get in the business of short-term rentals and find an experienced short term rental management company.
2. Real Estate Investment Trusts (REITs)
In a REIT, a group of investors pools their money together to invest in a property or multiple properties. The idea is that people who would not have had enough money to invest on their own can combine their funds with other investors and they invest as a group.
REITs are often used for commercial properties, such as office buildings. The group invests in an office building and the occupants pay you for using it, similar to rent. The profits are split between the different investors.
One of the positives of a REIT is that you can invest long-term or short-term, meaning there is more liquidity with your investment than if you bought a rental property for example.
3. Flipping Homes
We are fascinated with flipping homes. Turn on HGTV or any other home improvement channel and you’ll find a wide variety of different shows about house flippers.
To do this, you should have the skills to do the work yourselves or the capital to oversee the work performed by an experienced contractor. Many flippers try to DIY a lot of the work, which is possible if you know what you are doing, but there are many horror stories about flips gone wrong.
Not only do you have to consider your home renovation skills, but you also need to think about how long it will take to complete the flip, sell the home, and close. During this time, you are carrying the costs of the home, which can be stressful.
Which of These Ways to Invest in Real Estate Is Best For You?
Now that you know a little more about three of the more common ways to invest in real estate, you can start doing more in-depth research to see if it investing in real estate is right for you. Real estate for beginners can be overwhelming, so you should do your homework, start small, and don’t get in over your head.
Did you find this article helpful? If so, be sure to check out some of our other useful guides.
