Yes, YOU can invest in Real Estate!
For many, investing in real estate can sound like a pipe dream — something that other, richer people do. However, it can be something YOU do. There are many ways to invest. Today, we are taking a look at just a few.
Home Ownership:
That's right! If you own a home, you are already a real estate investor. As you make payments and stay in your home, you are gaining increased equity and appreciation. Way to go, homeowners!
Flipping Houses:
Flipping is when you buy a home that needs some work, make all the updates, and then sell it as quickly as you can for a profit.
WHAT TO LOOK OUT FOR:
You need to factor in all your costs, including a percentage of money for unknown issues that arise, and make sure you can finish the updates and repairs quickly. If you pay too much to start, or you spend to much on updates, your profits go out the window. We'd be happy to discuss our experiences with you and see how we can help you get good cost estimates and make good design choices that will appeal to buyers but won't break the bank.
Buy and Hold (Rent) Houses:
You buy a fairly priced home, possibly make some repairs or upgrades, and hold the home to rent it out. This could be a condo, single family, or multi-family, like a duplex.
WHAT TO LOOK OUT FOR:
Being a landlord has it's own challenges, like finding good renters! Again, factoring in all costs is key, including things like vacancy rates, taxes, insurance, property management company and routine repairs. The way investors typically look at rentals is determining the cap rate. This is simply the annual Net Operating Income divided by the costs. Most investors look for a 6% cap rate or higher. We are happy to look at a property and help you review the cap rate so you can see if it will work for you.
REITs and Other Options:
REITs are companies or trusts that own or finance real estate investments, and they sell shares to investors who hope to receive a percentage of the income made off that real estate investment. Other investing options include Exchange Traded Funds (EFTs), or real estate mutual funds.
WHAT TO LOOK OUT FOR:
You have no control over the decisions that are made by these companies, so it's less hands on than the previous investment options. Talk to a financial planner/adviser to learn more about these.