Investing in real estate can be a highly lucrative venture. Some real estate investments allow you to grow your wealth over time while also allowing you to earn a stable passive income. Plus, the real estate market is far more stable than the stock market.
While rental properties are one of the most popular ways to invest in real estate, they’re not the only one. You can also invest in commercial properties, plots of land, or even indirect investments such as mortgage bonds.
Don’t know where to start? We’ve got you covered! In this article, the experts at Income Realty Corporation will go over everything a beginner should know to start investing in real estate.
Best Types of Real Estate Investments
The best way to make a smart real estate investment is to know what kind of investment fits your goals better. Below are the most popular ways to invest in real estate.
Rental properties are a great investment, even when interest rates are on the rise. These investments allow you to grow your wealth over the long term while offering a source of passive income.
There are different types of rental properties you can invest in, including:
- Single-family homes. Purchasing a single-family dwelling is fairly simple due to the many financing options available for home buyers. Plus, there’s a great demand for this kind of rental property.
They also have a great appreciation potential. Just keep in mind that although single-family homes have lower tax rates than other real estate investments, you’ll need to invest in things such as maintenance, insurance, and renovations.
- Multi-family units. While they require a higher start-up capital, multi-family properties have a higher earning potential. However, they require more work than other types of rental properties.
Whether it is an apartment building, a duplex, or a triplex, you’ll have to spend more time and money on maintenance than on a single-family home. Luckily, you can save a lot of time by working with a trusted property manager.
- Vacation rental properties. Short-term rentals have a high earning potential, as they’re typically rented at a higher cost. This can allow you to make a larger profit in a short span of time.
However, vacation rentals don’t work everywhere. You’ll have to ensure that your property is located in a tourist-friendly area and invest in plenty of advertisements to fill your vacancies.
- Commercial rental properties. Whether it’s a retail, industrial, or office unit, commercial rentals are a great investment. While they require more maintenance, the earning potentials are bigger.
Many real estate investors purchase a property and hold onto it for the long term. Then, they sell it once the property has significantly appreciated in value.
The key to a successful buy-and-hold strategy is to purchase the property at a lower price. That way, the longer you hold onto the property, the higher the ROI will be.
Some real estate investors purchase homes in poor condition, make any necessary repairs and upgrades, and sell them at a higher cost. This is a short-term investment strategy with high earning potential.
However, fix-and-flip properties typically require more work. Even if you hire contractors to make the renovations, you’ll have to constantly go to the site to inspect that everything is going according to plan.
If you’re thinking about purchasing a rental property but don’t have the time or resources to do maintenance or repairs, turnkey properties are a great investment.
By buying a property that has already been renovated, you can save a lot of time and start earning a stable rental income.
House hacking is when investors buy a property with several units to live in one of them and rent the rest. With this strategy, you’ll own your home outright.
Plus, you’ll be able to cover your mortgage and other additional costs with your rental income, all while building your equity over time.
Rental Property Management
Managing a rental property is not easy. That’s why so many homeowners work with property managers.
If you have ample experience managing rental properties, you could consider becoming a professional property manager. Many rental property owners are willing to pay a fair amount of money to have someone else deal with the day-to-day tasks of your rental, making this a potentially lucrative business.
Become a Lender
There are many ways to finance an investment property. Given that getting a mortgage is not always easy, peer-to-peer lending has gained a lot of popularity in recent years. If you have the funds, becoming a lender is a simple way to invest in real estate with the peace of mind that you’ll get your money’s worth back.
Lending money can be a risky venture. However, you can keep your capital protected by signing a loan agreement. The contract should outline when the borrower should repay you and the consequences of late or missed payments.
You don’t have to purchase a property to invest in real estate. There are many indirect real estate investments you can consider, such as buying shares of real estate investment trust (REIT) stocks.
Other alternatives include real estate company stocks, exchange-traded funds (ETFs), and mortgage bonds.
Real estate investments can seem daunting at first. There are many important factors to consider before investing in real estate, such as the type of investment and type of financing you’ll be using.
Luckily, there are many ways to invest in real estate for beginners, such as REITs, house hacking, house flipping, and buy-and-hold strategies. Now that you understand these types of investments, you are better suited to choose the best one for your goals.
Are you thinking about investing in the Miami, Florida, real estate market? Contact Income Realty Corporation today! With over 44 years of experience, we can help you find the perfect property to generate a steady income and grow your wealth over time.