Investing in real estate can be a great way to make extra income. However, one has to be willing to devote plenty of time to learn and understand the nuances of the industry. Otherwise, things with real estate investing can go south real quick.
Real estate is generally a good investment option. In addition to generating passive income, it can be an incredible long-term investment if it appreciates over time. An investor can even make real estate part of his or her overall strategy to start building wealth.
It can help you to save for your startup, or provide some side hustle income. But before one gets to that stage, he or she will need to educate themselves about the process and the best ways to get high returns. There’s also the initial capital aspect that needs to be considered.
According to a report dubbed “2017 Real Estate Investment Survey,” the appetite for real estate investing seems to be growing. Although only 15% of Americans are currently investing in the sector for business reasons, 77% of respondents aged 35 to 44, and 72% of millennials aged 18 to34 believe that property flipping is a great way to generate income. About two-thirds of men and women in the US also agree that house flipping an excellent way to make money.
But still, 70% of US citizens think that investing in real estate is harder than investing in other asset classes like stocks, bonds, commodities, and cash equivalents like cotton, gold, and oil. This can be attributed to the fact that investing in real estate needs lots of research, inspections, mortgages and bank loans, headaches, and contract negotiations. Only a few people would want to go through all that.
The study further revealed that millennials would be more willing to invest in real estate if only there were a technology that simplified the process.
Ways to invest in real estate
There are different ways to invest in real estate. Here are some of them:
Also known as real estate trading, flipping involves buying a property, improving and updating it and then selling it within a short timeframe. The idea behind house flipping is to get a great discount – like through bank foreclosures. Flipping is enticing, especially when one gets a good deal, because of its fast returns.
When someone buys a home, they are investing in real estate to some extent. The only difference between them and real estate investors is that they won’t make money with their residential home as investors do with other types of real estate. For those who are only keen on upholding their financial peace of mind and not having to deal with landlords, owning a home can be a great place to start.
Owning a rental property is yet another great way to invest in real estate. Rental properties generate rental income and could boost both monthly and yearly income. On top of that, it could serve as a retirement plan, and if one chooses to sell the property, he or she will make a good profit if it appreciates.
Real estate investment trusts (REITs)
REITs are trusts or companies that finance or own property investments and sell shares to investors who hope to get some cut from the income generated from that property. REITs usually use investors’ money to buy and manage income properties.
Making money through real estate investing
As mentioned above, an investor can make money from their properties in two ways: through rental income and appreciated value.
One of the main reasons investors invest in buying or constructing rental property is to generate passive, long-term income. Rental property doesn’t usually require any effort – other than minor repairs and maintenance; the landlord won’t need to do much. And it becomes even easier when he or she hires a property management company.
Increase in value
Properties almost always appreciate irrespective of the market’s condition. One only has to get the property at a lower price, revamp it and sell it at the right time. Experts in real estate investing advise buying in cash and also spare some money for repairs and renovations. Again, since the house may take a few months to sell, one needs to have an emergency fund. This way, he or she won’t have to deep further into their pockets in case something unexpected happens.