How to make money in real estate...
A successful real estate investment provides a great return on your money without much effort.
Each way to invest in real estate has a different level of risk, return, and time commitment. Some investments in real estate are more of a full-time job than an investment, like fix and flipping.
Long Term Rental Properties
Long term rental properties can take a lot of initial capital, but the returns are incredible if you are patient and buy right. When looking at long term rentals, you need to consider cash flow, equity capture, appreciation, equity pay down, and tax benefits. Typically, your return on investment is going to be higher than any other type of real estate investment, especially if you hold the property.
Fix and Flips
This is a great way to start in real estate, but it takes a lot of work. You have to find deals, manage contractors, keep track of accounting and most importantly sell the property at a profit. It also takes a lot of money for down payments and repairs, even if you’re using a hard money lender. You are still on the hook for that money.
Your Own Home
Your personal residence is another way to invest in real estate. You aren’t bringing in any rent or income, but there are ways to make your personal residence a great investment. Many people will buy a home in need of repairs at a discount and get a better mortgage. Sometimes, they’ll also get a better property tax rate because they are buying it as a main residence. These investors will live in the home while fixing it up and making repairs. After the property is repaired, they can sell it or turn it into a rental. This is a great way to buy a rental property with little money down. You can buy more than one property this way and build up a portfolio of rentals with small down payments.
Investing in Vacation Homes
To invest in a vacation home, buy a house in a great tourist location. Use an experienced property manager to rent it out for you and collect the rent. The difficult part of a vacation rental is the extremely cyclical market. Peak season can bring top dollar while low season can bring almost nothing, because demand goes down. The cash flow on vacation rentals can look amazing at first, but the management fees, expenses, and vacancies will almost always be much higher on a vacation rental than on a long-term rental. Make sure you look at all variables and trends in an area when considering purchasing in this business model.
Short-Term Rental Investments
Short-term rental properties can be planned or come about as a necessity. Many investors will invest in real estate and hope it appreciates so they can sell the property for a profit. This is a dangerous tactic when you invest in real estate. Most of the time, cash flow is not the primary goal and people end up losing money every month when they invest for appreciation. This is speculation, which is much like gambling. It is very difficult to hold a property for years when you are losing money every month. Many times the investor will be forced it sell the home in a down market and lose even more money. There are many ways to make money investing in real estate.
Long Distance Investment Property
Many people would love to invest in real estate but find home prices extremely high where they live. Many investors are starting to purchase properties that are out of state and even out of the country. There is a lot of work needed to make long-range investing work. You need to pick a market, find a great real estate agent, find a great property manager, and then find the right property or properties.First, pick a location. Make sure that you pick an area that fits your rental business model. This is key to any successful strategy.
If you want to invest in real estate long distance, you need an awesome agent. That agent will help you find deals, possibly inspect homes for you, and schedule inspections. Next, find a property manager. If you want to invest in long distance rental properties, you need a property manager. A good property manager can mean the difference between a profitable rental and a total disaster. A property manager can find you the right property, rent the home, manage the expenses, hire contractors, and take care of the house for you.
Long-term rentals will continue to provide cash flow month after month and year after year. Fix and flips can provide tremendous income, but you must keep a high volume of deals going and turn them quickly to make a lot money. Do your research, take your time, and buy right.