Whether owning a rental property as a landlord or flipping a property, investing in real estate has grown in popularity over the past few years. While not necessarily for everyone, real estate can make a great addition to anyone’s portfolio. Read on for the top 3 ways to invest in this growing market.
Rental Properties
If you’re looking for a long term investment, you can easily find properties with rental opportunities. The most common option is an apartment building or a series of condos: buildings that can house several tenants. While become a landlord is a significant investment (of time, funds and effort), it can be a great option for certain investors.
Landlords often live in the building they own, which gives them the opportunity to work from home. People skills are important when following with path; dealing with renters is a large part of being a landlord. Problem solving skills are also critical. Like with any property, things go wrong. Pipes burst, the power goes out and things break down. As a landlord, it’s your responsibility to fix these problems for your tenants.
There are other rental property opportunities outside of apartment buildings. Commercial properties, whether office buildings, warehouses or simply a large space in an industrial area are also a great option. They present their own set of challenges and rewards.
Trading
Another opportunity lies in purchasing properties with the intent to sell them at a profit. This is known as “flipping” and can be accomplished in a few different ways, each requiring an in depth knowledge of the real estate market. The first technique involves finding undervalued properties to resell. This involves significant research and constantly being on the lookout. Properties can be undervalued for a variety of reasons, such as slow seasons or less than expert real estate agents. The advantage of this method is it involves less of a financial risk than other methods. While you’re putting a significant amount of money forward to acquire the property, you won’t need to invest any additional funds. However, the risk involved can be significant; even with expert knowledge of a real estate market it’s always possible that a property takes a long time to sell. In contrast, another technique involves renovating a property after purchasing it. The intention here is to increase the property’s value before selling it for a profit. While this involves less risk than the previous method (you’re adding value to the property, rather than simply playing the market), it requires significantly more funds. Renovations can be quite expensive, and you still have to purchase the property beforehand.
REITs
This final method is significantly different than our previous two, and actually has more in common with the stock market than other real estate opportunities. Investing in Real Estate Investment Trusts is much like investing in the stock market; you make your funds available to a company that owns income generating real estate with the understanding that they will make your investment grow. This method is significantly less hands on than others. You don’t own any property yourself and therefore have no responsibility towards a tenant or a bank. However, there is still risk involved; no investment is guaranteed and you must be judicious when dealing with REITs.