If you’ve ever had a landlord, you probably won’t want to be one. There’s a lot of answering calls about enormous bugs, overflowing toilets, or leaking pipes. It’s not an appealing job.
However, if done correctly, real estate investments can be profitable, albeit not immediately apparent. It will also diversify your current financial portfolio while also providing you with an extra income stream. Keep in mind that many of the finest real estate investments don’t necessitate having a renter on hand all of the time.
The issue is that many new investors are unsure of where to invest or how to do so. From cheap to high upkeep, here are some methods to generate money in real estate—and how they work.
Real Estate Appreciates in Value
Many people who aren’t particularly savvy in investing intend to hide their money in a savings account, and it doesn’t particularly grow. But with real estate, this problem isn’t present. If you look at real estate prices in recent history, they tend to go up in value. While it’s not exactly a 100 times profit every time, even a 3–4 times increase is already significant. The average real estate increase is stable enough that it’s a safe place to put your money in. However, if you’re thinking of buying and selling property, it’s vital to get the right timing as you might inadvertently sell it at a time where you’re essentially at a loss. Be smart when you sell a property, don’t always buy properties when they’re at their lowest- think of how it can be in the next few years.
Positive Cash Flow
Unlike other forms of investments that don’t always come with cash flow, you’re only buying an asset that you project will increase value over time. However, some real estate investment schemes rely on cash flow. Things like rental properties and other property leasing ideas can net you some profit (after clearing off the liabilities, of course).
Think of a single-room unit that you’re renting out for, say, $1000 every month. You might have a $500 monthly payment to the bank to clear it off, but you’re making more than enough to cover any maintenance fee while still going home with a profit. This positive cash flow is among the primary reasons why real estate investments are so popular.
Another source of income you can consider if you get into real estate is the ancillary income you get from other businesses you own. For example, you can own a food franchise business within the neighborhood or a laundromat in your property that can generate extra income for you in combination with your rental income. This isn’t the largest income-generating, but it’s still worth considering, especially if you already own other businesses and are contemplating getting into real estate.
Since the dawn of commerce, buying low and selling high has always been the strategy of merchants. But “flipping houses” isn’t as straightforward as that. You’ll be purchasing a property sold low, not just in terms of price but also quality. It’ll most likely be in sore need of renovation and repairs—and that will have to come out of your pocket. And after renovation costs, you also need to sell it at a premium because you’ve invested money and time in it. When explained like that, it might sound like a lot of work. But this system works and has worked for many budding entrepreneurs. Fixer-uppers have become popular these past few years because TV shows focus on it, and even some viral videos display how skilled workers renovate an old property. If you have the knack for renovation and repairs, this is another way you can make your money in real estate.
Planning for the Future
The best real estate investments, like all investment decisions, benefit you as an investor in more ways than one. It helps you become more financially secure and also leaves your family with something substantial. However, when you pass on, you’ll have to think of contingencies and to whom you should leave all your investments and properties. Of course, you also want to include these in conversations with your estate attorneys since your investments are vital assets that you need to pass on to your next of kin.
Real estate investments might cost you a pretty penny at the start. But with the right management, the returns of investment can be rewarding. Consider the time you currently have and are willing to sink, how much money you want to put into it, and if you want to be the person who deals with home repair concerns when they emerge. A REIT or crowdfunding platform might be a better option than buying real estate outright for those without home repair or DIY skills.