Over the past decades, owning a real estate property has become a more common type of investment.
Although many investors are still not confident about investing in the housing market since it crashed in 2007, there are strong signs that a recovery is underway. If you’re looking to jump into real estate investment, there are many ways to gain financial returns from your property.
The most common way to invest in real estate is to have a rental property. You can invest in a property and then rent it out, using the rent to pay for the mortgage and other expenses associated with property management. By the time the mortgage has been completely paid, you’ll have an asset that has appreciated in value but your total investment would probably be just the amount you put in for the down payment. If you continue to rent out the property, you then start earning rental profits.
Another strategy to earn from your real estate investment is known as flipping or real estate trading wherein an investor buys a run-down or distressed property and then renovates it for the purpose of putting it up for sale later. You will earn from flipping houses by buying properties below the market price and then selling at a higher price. Unfortunately, flipped properties do have a negative reputation for poor quality and utilizing cheap materials.
Ensuring quality while sticking to a renovation budget should be one of your goals if you are considering becoming a flipper. You may also want to become the other type of flipper who doesn’t shell out any money at all into a property for improvements but invests only in properties with intrinsic value that can be sold for a profit even without any modifications.
You can also join an investment group that invests particularly in real estate properties. The group will buy or build an apartment block, office building or retail complex and then seek investors to buy units through the group. You can own one or more units and rent them out. The entire property is collectively managed by the real estate investment group, including finding tenants, in exchange for a portion of the monthly rent.
Even if your only real estate investment is your own residence, it can still be a truly valuable asset for you and your family. As the value of residential real estate rapidly increases, your residence becomes an important part of your net worth. With careful estate planning, you can transfer your residential property to your heirs with the least amount of taxes against it so you can preserve your residence for your family’s future generations.
Raul Cordova is a frequent contributor to real estate sites and financial blogs. He is a retired mortgage broker who has also written for companies like starlightinvest.com and other Canadian firms.