As an appreciating asset, it can also be a continuous source of generated income, whether you invest in residential, commercial, or undeveloped properties. And these investments can be short- or long-term, giving you the option to choose what’s best for you.
Many people believe that to begin, you need a cash reserve, good credit, and assets. However, this is simply not true. You can get started with just a few hundred dollars when opening an escrow account, and if your funds are limited, you can potentially secure financing from several sources, such as an FHA loan, a hard-money lender, a home equity line of credit, a personal loan, or a cash-out refinance. So if you’ve been thinking about entering the world of real estate investing, take the leap—with the right strategies and understanding, it can be an excellent way to invest in your future.
Investment options
The types of investments that follow are among the most popular, but it can be helpful to discuss the best option for your specific situation with a real estate agent and financial advisor.
House flipping
Purchasing a run-down property or one located in a lowvalued area (generally referred to as the worst-looking home in the nicest community) can be a great way to begin your investment career. However, while flipping a fixer-upper for a profit may seem easy on home renovation TV shows, it’s important to remember that the professionals on these shows have experience in navigating the complexities of such a project. So unless you’re an experienced contractor, it’s best to consult with a qualified one to help estimate what it will cost to complete the project. Then you can decide if it will be profitable enough to fund your next investment.
Commercial real estate
You can invest in a variety of commercial real estate properties, such as shopping centers, warehouses, industrial parks, or dwellings that have five or more units. (Residential properties usually have only up to four.) There are many benefits to commercial investments, including a regular rental income stream, the potential to earn a higher income, less competition, and longer lease terms than a residential property.
Vacation rental
Investing in a vacation rental can be incredibly lucrative. However, before you make a purchase, weigh its potential as rental income versus its costs, which include the purchase price, maintenance, and fees associated with its ownership. Also, research the local market to determine the best time to purchase and when to raise rental prices to make your investment worthwhile.
Lease options
If you’re a first-time homebuyer without enough cash or credit to buy a home through a bank or lender, this arrangement is the perfect way to get started in the world of real estate. The owner will not only rent their property to you but also give you the option to buy it at a preset price when the lease agreement ends. This could provide you with more time to save money and build your credit to qualify for a loan.
Long-term rentals
Investing in real estate through the buy-and-hold strategy is a traditionally popular method. The goal is to make the property an appreciating asset that will build your real estate portfolio. When selecting a property, the most important consideration is location: the more desirable the location, the higher the future rental income and potential selling price.
To help you better understand investing and how to make the most of it, seek outside resources such as a real estate investment class. A real estate agent is also a valuable asset to help you on your journey from start to finish.
