A friend recommended an article in Investopedia on “Simple Ways to Invest in Real Estate.“ If you’re considering how to make money from buying houses or condos, there are actually a couple of ways to do it:
1) Purchase basic rental properties. Buy a house, fix and rent it out. Plain, simple and fast. The upside? Ideally you can charge enough to cover the amortization, taxes and costs. But most investors will charge only enough to pay the mortgage, so that the rent is not so high, and to help him get a tenant sooner than later. Then when the mortgage is fully paid, the following rental payments are already pure profit. The downside: is it your cup of tea to be a landlord? Can you handle having bad tenants? And do you have cash flow sufficient to cover at least one year’s amortization and maintenance costs (that’s the worst case scenario in case you’re taking time getting a tenant)?
2) Join a real estate investment group. If you want to own rental property but don’t relish being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company (thus joining the group). A single owner may own multiple units or just one; but the company operating the investment group collectively manages all the units - they do the maintenance, advertise vacant units and interview tenants. Then the company gets a portion of the monthly rent for managing the units and premises.
3) Go into real estate trading. Also known as flipping. One style of flipping: find a value buy, don’t renovate, hold on to the property for a long time til it appreciates, then sell.
The other style of flipping is to add value to an older property by renovating it almost completely like new, then selling it with a decent margin. Doing this allows you to make a good return on investment in a shorter time. The disadvantages of the latter type of flipping is that your funds may be tied up, the renovations time-intensive. You may also get caught in a dead selling period, or the market may find that your selling price is beyond the normal range of pricing in the area.
4) Do REIT. Real estate investment trust (REIT) is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. Much like regular dividend-paying stocks, REITs are a solid investment for stock market investors that want regular income.
If you want to read more on “Simple Ways to Invest in Real Estate”, read the full article here.
