Investing in the real estate market field is very lucrative – that’s a fact. Moreover, it also comes with a lot of investment options as per your liking and comfort. For example, some may require more time than money, while the others may require more money, and less time.
Your home is usually the first thing that comes to mind when you consider real estate investing. Investors have many more alternatives when it comes to investing, and they aren't all physical assets.
In the last 50 years or more, real estate has been a popular investment instrument. In this article, we would like to share with you some of the most popular options for individual investors, as well as some compelling reasons to invest.
Investing in rental homes will inevitably turn you into a landlord, which is something to think about. Will you be satisfied and comfortable in keeping up in that role? Remember that you will have to take the responsibility of paying the mortgage, property taxes, and insurance, as well as maintenance of the property, finding residents, and managing any issues as they come.
Being a landlord is a hands-on investment, unless you employ a property manager to handle the chores. Taking care of the property and the tenants can be a 24/7 job, and one that isn't always pleasant, depending on your situation. That being said, by proper selection of your homes and tenants, you can reduce the likelihood of serious issues.
Rent collection is one method through which landlords make money. The amount of rent you can charge is determined by the location and condition of the rental. Nonetheless, determining the appropriate rent can be tricky because charging too much would drive tenants away, while charging too little will leave money on the table. A frequent technique for rent determination, is to charge just enough rent to meet expenditures until the mortgage is paid off, at which point the majority of the rent, is profit.
Perks are great, but they never come alone. They’re usually accompanied with problems; for example, tenants will be calling you at odd timings and knocking on doors and asking for the rent is not an easy feat either. In this case, we advise considering to hire a property manager. Firstly, a property manager will do all these tasks for you, which will assist your investment and money-making procedure to go swiftly, and secondly, they will keep the investments in check, to ensure your accounts are sorted and that you are keeping your profit.
Real Estate flippers are different than your buy-and-rent landlord, much like day traders are different than buy-and-hold investors. Flippers buy homes to hold them for a short period of time—usually three to four months—in which time they flip their purchase into a profit. When it comes to flipping a house, there are two main methods for doing so:
Repair and update: Purchasing a home you believe will appreciate after a few repairs and renovations. In an ideal world, you'd finish the project as quickly as possible, and then sell it for more than you paid for it (in a price that will also cover the cost of the renovations you invested in flipping it around).
Hold and resell: The flipping method works uniquely. Rather than buying a house and renovating it, you buy in a hot market, hold for several months, and then sell at a profit.
However, any purchase carries a risk, for instance the chance that you won't be able to sell the house for enough money to make a profit. It can be difficult, considering that most flippers don't have enough cash-on-hand to pay long-term mortgages on their properties. All true and still, when done correctly, flipping may be a profitable way to invest in real estate.
If you intend on flipping and renovating the house, you will need someone to look after all the work that is being done. You should never leave the contractors unsupervised. In this case, you can hire a manager who will look after the contractors and supervise them, without you having to neglect everything else you’re doing to be there and supervise the work. Similarly, if you plan on selling the house for a profit, a real estate property manager will help you spread the word, look after the potential client's, and help you decide which is the best candidate to buy or rent the house.
Real Estate Investment Groups
REITs (real estate investment groups) are similar to tiny mutual funds that invest in rental properties. A real estate investment group may be the answer for you if you want to own a rental property but don't want the headache of being a landlord. A firm will buy or construct a set of structures, usually apartments, and then enable investors to purchase them via the business, thus becoming group members. A single investor can own one or more self-contained residential units. The investment group's operating firm, on the other hand, runs all of the units and is responsible for the upkeep, advertising, and finding tenants. The corporation receives a percentage of the monthly rent in exchange for this management.
Investment groups come in a variety of shapes and sizes, but most importantly, when deciding to go with an investment group, the investment group acts as a property manager. In the normal conduction of things, the lease is in the investor's name, and all of the units pool a portion of the rent to protect against vacancy. This implies that even if your apartment is vacant, you will be able to pay your mortgage. However, we think it’s better that you hire one of you to own to keep a check and balance and make sure nothing happens under the table.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is the greatest choice for investors who want real estate exposures in their portfolio without making a "typical" real estate deal. Whenever a corporation (or trust) employs money from investors to buy and manage income properties, it is known as a REIT. REITs, like every stock, can be bought and traded on the major markets. In order to keep its REIT status, a company must pay out 90% of its taxable profits in the form of dividends. REITs avoid having to pay corporate income tax in this way, whereas a typical firm would be taxed on its profits and then have to determine whether to share the after-tax gains as dividends.
Like normal dividend-paying equities, REITs are a good choice for stock market investors looking for consistent income. In contrast to the categories mentioned above of real estate investment, REITs allow investors to participate in nonresidential ventures, such as malls and office buildings, which are typically not available to individual investors.
In this case, you can still hire a property manager who will not be directly managing the property, but will look after your accounts and investments, to ensure that everything is in the right place, and that you are making the right profit.
Property managers can be your knight in shining armor and your one-man army. They can do so many things, take all the burden off of your shoulders, and help you with all your property management tasks!