3 ways to invest in real estate

3 ways to invest in real estate

There are a range of options when it comes to real estate investment.

(Flickr/Mark Moz)

WASHINGTON, November 29, 2016 – Real estate has become a popular investment. There are a range of options when it comes to real estate investment. Three of the most popular are house flipping, rental properties, and real estate investment trusts.

House Flipping

House flipping requires a lot of work. To flip a house, you must buy a home, fix it up, and sell it for more money than you spent buying and fixing it. This seems like an easy enough formula, but in reality it involves a lot more than many people are able to provide in terms of money or ability. For some investment opportunities, you can supply a smaller portion of money and allow your money to do the work for you. In house flipping, money can definitely do the work for you as well, but you’ll need a lot of it in order to pay for the home, pay people to fix it, and pay people to sell it. You can save some money by fixing it yourself, but that is a full-time position in itself.

Despite the difficulties, flipping homes can be extremely rewarding.

There are a lot of unknowns when it comes to house flipping. For example, there is a certain amount of risk because a house may not sell for what an investor is hoping for. To minimize this risk, it is important to do your research. You will need to know your local real estate market, be realistic about home fixes, know your financing options, and focus on your bottom line. Keep track of popular trends like why tiny homes are popular, what schools are popular in your area, or energy saving fixes that you can complete to make your property more desirable.

Home flipping requires a ton of money and energy, but it also provides the most freedom in your investment.

Rental Property

Investing in rental properties provide the ability to gain money from them consistently. This will, of course, still require a good amount of money up front in order to purchase the property you are hoping to rent. However, expecting your property to immediately become profitable is unrealistic. Before investing, research the property taxes, the long-term financial plans with your property, and how much upkeep you are willing to invest in your property. Owning a rental property is unlike flipping a house in that it is a long-term investment that will require TLC throughout your relationship with it.

Another aspect to owning a rental property is understanding the rental market in your area. Start with comparable rentals to set a realistic price. Know that most, if not all, of the rent will go towards the loan you took out to pay for the home or for maintaining the property. Understand what is commonly handled by the landlord, and whether you plan to handle those yourself or whether you will contract out the work.

Rental properties do often provide tax breaks in addition to the actual income.

On the downside, landlords may have to deal with difficult tenants, expensive and unexpected repairs, and overwhelming property taxes.

For those unafraid of potential difficulties and work, rental properties can be a great investment.

Real Estate Investment Trust

A real estate investment trust (REIT) is a great way to invest in real estate without involving the overwhelming amount of outside work that the other two options have. A REIT allows your money to do the work for you, and is much like investing in a mutual fund. Investors own shares of properties without the responsibility of the actual property ownership. Investors may be responsible for income tax on income made through the investment, but may avoid most tax liabilities. It is not completely free of risks, and it’s not the best option in terms of tax benefits, but the ease involved with this investment makes it a popular choice.

There are industrial, office, retail, or residential options for REIT investments. A single REIT may own many different properties which allows you to invest in something you would never be able invest in on your own. REIT’s are required to pay out at least 90 percent of their taxable income to shareholders which make them a great income-earning investment.

There are many more ways to invest in real estate other than these three options, and depending on your interest and income, you may find another option better suited for you.

Real estate can be a confusing investment opportunity due to the financial and legal intricacies associated with this type of investment, but with the right help and the right research, real estate can be the right investment for anyone.

Whether you’re willing to flip a house, act as a landlord for tenants, or let your money do the investing for you, there may be a way for real estate to make money for you.

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