Did you know that only 28% of Americans are “financially healthy?” If you’re looking to gain financial freedom, look into investing in real estate to help you get there.
Before you can begin, you need to know where to start and what kinds of real estate investments are best for you.
Here’s a guide to real estate investing 101 and 5 different types of investments.
1. Real Estate Investment Trusts
Think about real estate investment trusts, or REIT’s, as mutual funds and stocks for real estate.
REIT’s give you the opportunity to be a shareholder in larger properties like commercial real estate, office buildings, hotels, condominium complexes, warehouses, and industrial property.
Shareholders do not have direct responsibilities, which is a hands-off approach to investing in real estate.
A REIT investment is an investment with tax benefits. Your share of the profits is tax deductible.
2. Owning Rental Property
Owning rental property is a long-term investment, but qualifying for a loan on a home where you’ll not be residing can be a more difficult process than getting a traditional mortgage.
When you have a rental property, you’ll be acting as the landlord. This means that it’s your responsibility to fix any issues with the property, collect rent, manage complaints, hire pest control, among other responsibilities.
A property management group can help take some of those responsibilities off of your plate.
Prepare yourself for potential periods of time where you don’t have renters or rental income.
3. Owning Your Own Home is Real Estate Investing 101
Simply owning your own home is real estate investing.
If you properly maintain and improve your home with some investments, you can see that money again when you go to sell your home.
It is possible to over-improve your home though. Try to not invest too much money into your home on certain upgrades if you live in an area where you won’t see that money back when you put your house on the market.
4. Investment Groups
Investment groups for real estate usually focus on groups of residential apartment and condos rentals.
You own a part of a rental property without dealing with the responsibility of being a landlord. Another company deals with those duties, so you’ll share a cut of your profits with the management company.
Every investment group runs differently, so be aware of all the potential fees that can come with being in an investment group. Knowing real estate law can help with this and eliminate many surprises.
5. Flipping or Trading Property
When you’re flipping homes, you’re working with a shorter timeline. This can either work for you or against you depending on the current market conditions.
You’ll need investment capital in order to purchase the home. When flipping properties, there will also be a list of repairs or improvements that you’ll make and pay for in order to make a profit when selling the home.
You can purchase a home that you know can make money without renovating it, or purchase a home with the intention of renovation. Deciding what path to take with could either shorten or lengthen the flipping process.
Make Profitable Decisions
This guide to real estate investing 101 should help you decide which type of real estate investment opportunity works best for you. Use your capital smartly, and make sure you’re aware of any fees and the extra money you might have to spend in order to make money as profit later.
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