06 Aug 2017

4 Ways You Can Cash In On Real Estate

Many people look at real estate as a means to own a home or have a place to live.  Many people look at real estate as a means to own a home or have a place to live.  The other side of real estate is the investment opportunity that it presents. There are several different ways that someone can invest in the real estate world.

1. Rental Properties

Rental properties are the most commonly known means of real estate investment. This is the process whereby an individual purchases a property with the intent of renting it out to others for a profit. These properties can be condominiums, houses, multi level buildings, etc.

Pros: When your home is rented the rent that is paid to you as a landlord will go towards, or even cover, your mortgage payments.  This results in your mortgage being paid off by someone else while the equity in your home is growing.

Cons: The responsibilities and/or duties of being a landlord fall on you. For example, you are responsible for handling any major repairs that arise in a  timely fashion for your tenant, ensuring that all the appliances in the home are in working order, and maintaining the condition of the home according to legal and health standards.  

2. “House Flipping” 

This is another lucrative real estate investment.  In this process, a person (or group of people) purchase a house, renovate it and then resell it to make a larger profit than was spent to acquire the property.

Pros: There is less overall responsibility for the dealings of the home.  When you are “flipping” a home all you have to worry about is fixing the property to sell it.  In this investment, you will not have to concern yourself with finding a good tenant or upkeeping the property once it’s done.  This scenario has a quick turnaround time with no permanent attachment.

Cons: The largest difficulty in flipping a home is the additional capital (money) needed to renovate. Once money has been spent on purchasing the home additional funds are needed to fix it into sales-worthy condition. Not everyone has access to this type of capital.  

3. Pre construction Properties 

This approach to real estate investment has become increasingly popular, over the last few years, in the real estate investment world.  This is the purchase of a property that has not been built yet and, in most cases, won't be completed for a few years. The owner (owners) pay money onto the property over various stages of the property's construction until its completion.  At completion, the owner can sell it, live in it, or rent out- depending on the contract.

Pros:  Unlike a resale purchase a pre constructed property allows you to pay for the downpayment of your investment over time.  “New builds” have a scheduled payment arrangement which divides the down payment into installments over the duration of the construction period.  This not only allows one to pay over time while the value of the property continues to grow at the same time but also makes it a bit easier for the average purchaser to get their foot into the market.

Cons: With the new builds. a potential downfall is the wait time for your investment to actualize.  Although the value of your property is growing while it is being built, you cannot fully reap the benefits of the value until construction is completed.  This wait time is usually longer in this investment than others, as the initial purchase is so many years before the property will exist. 

4. REITs (Real Estate Investment Trust) 

This form of real estate investment is done on the stock market, as opposed to directly within the real estate market.  It is created when a corporation uses investors' money to purchase and operate income properties.  Individuals can then buy into these stocks and make money, like any other stock, as the value rises and falls.

Pros: With a REIT investment you as the investor are not actually handling anything to do with the physical property itself. You will not have to worry about maintaining a property, having additional capital to renovate the property or finding suitable tenants to live in your home.  There is far less ground work and responsibility with this option.

Cons: When using the stock market as a means to invest there is also less control of how your money is being used and how it can grow.  As the investor, you are simply watching your money fluctuate with the market but have no say in how it is occurring.

If you’ve been considering investing in real estate, rest assured that there is an option that can work well for you. Whether you have a large budget or a small one, want lots of hands-on responsibility or as little as possible, or want a long-term or shorter term investment, there’s a way to get into the real estate market that will meet your needs.

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