Many people look to real estate as a way of diversifying a portfolio and/or generating additional income. Unlike other avenues of investment, getting into real estate is usually an unambiguous, clear-cut process. There are a number of inroads, but here are three common options you should consider, each with its own advantages, drawbacks, and sweat equity requirements.
Rental Property
Owning rental property is one of the best ways to make money with real estate. Some people buy a multi-unit property where they occupy one unit while renting the others to tenants. To see a profit, you need to apply a hotel pricing strategy. By then, you would rent out units at a higher price than the cost of ownership. Your sweat equity will vary depending on how hands-on you are. If you’re not handy enough to do your own maintenance, be sure to budget for a property manager. This has proved to be a lucrative option for several, including Steven Taylor Landlord.
House Flipping
Buying a cheap home and renovating it to sell it for profit is what is known as house flipping. You may have heard of TV shows based on house-flipping businesses. These shows often make house flipping look much easier than it is in reality. This option requires a high level of sweat equity. If you spend too much on renovation or you’re not able to sell quickly enough to avoid monthly loan repayments, you may lose all profit.
Real Estate Investment Trusts (REITs)
REIT ETFs yield the opportunity to finance without getting your hands dirty with renovations or property maintenance. They involve commercial properties that can potentially generate high profits. If you don’t need a steady income, this may be a great option for you. Novices should choose publicly-traded REITs, available through brokerage firms. A REIT usually requires a minimum investment.
There are many paths to real estate bankrolling. Be sure to go with an option that you can stomach, whether it’s high sweat equity or high initial investment. People and companies will always need properties to live and operate respectively, so real estate is usually a worthwhile consideration.
