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Real estate investing can be daunting for even the most experienced investors, let alone an individual entering the market for the first time. Given the vulnerability of the stock market and cryptocurrency over the last few years, it can be wise to broaden your portfolio and invest your money in other ventures. Real estate investing can be a great opportunity to diversify yours and your family’s portfolio to create more financial opportunity down the line. If you’re interested in getting involved in real estate investing, consider some of these tips to help you along your journey.
When looking for an investment property, you’ll want to determine how you want to recoup your investment and turn a profit – as that is the foundation of any investment. The most common types of reality investments include flipping a home, renting it out on Airbnb, or being a landlord. When it comes to house flipping, the profit is a one-time payment but it's usually pretty large. House flipping can be even more lucrative if you have a background in construction because if you can complete the project without heavily outsourcing, you’re then maximizing your profits. Also, keep in mind flipping doesn’t have to mean taking a home that is falling apart and making it livable, it can also mean taking an already habitable space and making it more modern with updates. If you’re unable to complete the project by yourself, make sure you consult a professional before purchasing the property and that you get a reputable inspection. If the sale falls through due to a bad inspection, you can then choose to save or spend the money, or reinvest it.
Alternatively, you can look to utilize Airbnb or use the property for short-term rentals. If you already have a home in a popular city or travel destination with a separate unit, you can start listing your home right away. Or, if your home isn’t capable of being listed for rent, look at buying a home in a popular destination. The purpose of people renting a home is to have enough room for the whole family, most commonly on vacation. So, you’ll want to pick a popular vacation spot that has a year-long appeal for your investment. You don’t want an investment property that only experiences a summer rush. Think of places such as a lake where there is summer tourism and maybe an ice fishing scene in the winter, or a warmer beach town which also experiences a winter rush.
If you’re looking for monthly additional streams of income, then being a landlord is your best option. When looking at being a landlord you’ll need to decide if you’ll be the point of contact for the residents or if you’ll hire a property manager. If you have the time to devote to being the point of contact, this is a good way to maximize profits. However, it is important to remember that emergencies can arise at any moment so it might be better to have someone else on call if you can not easily drop other things to take care of your tenants. Another way to be a landlord would be to buy a multi-unit house, live in part of it, and rent out the other units. Depending on the price of the property, this might allow you to pay your mortgage using the other tenant's rent payments and then live cost-free in the home.
It’s no secret that location is a huge factor in the value of your investment and your ability to return a profit, regardless of the type of real estate investment you pick. However, there are different locational factors to consider for each type. If you’re flipping a home, you’ll want to
consider a nice neighborhood in a good school district in order to appeal to families and other potential buyers. For a rental home, you’ll want to consider what type of renter you want to appeal to: young adults, couples, families, or all of those. Then, you’ll want to pick a location with nearby activities for your preferred renters. If you’re renting out an apartment you will want to consider what type of amenities are nearby, what type of parking is available, and the types of walkable entertainment, shopping, or restaurants nearby.
It’s often said that it takes money to make money, and that is true when it comes to investing in real estate. The most important part is identifying how much money you have at your disposal to invest in the market. A great way to determine an appropriate investment for your budget is to get a mortgage pre-approval, that way when you’re shopping for your investment property you know what your budget is. The idea is to then make a profit larger than the mortgage so you pay it off and then have some leftover income. Consider speaking with a real estate professional before purchasing an investment property, as real estate has become popular over the years – they likely will have some additional tips and advice to share with you. Remember that even in the strongest markets it can take some time to turn a profit, so keep this in mind as you’re in the thick of it. Doing your research ahead of time and ensuring you have a strong cushion of savings can provide stability while you and your family are renovating or just waiting to see the cash start flowing in.
Once you’ve evaluated all of these considerations, you’re ready to purchase and start investing. It’s a good idea to involve your family and make them aware of all the plans ahead and moving parts of the projects. You can set some expectations as to what everyone's role is in the process, especially for one of the more labor-intensive projects like house flipping. Once you’ve done so, you can feel confident in the next steps to invest, flip, and patiently wait to see the financial gains from all your hard work.
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