Active Strategies: Rental Properties
When it comes to investing in property, you have a couple of avenues that could lead to real profits for you: active real estate investing and passive real estate investing. We’ll first take a close look at active strategies, which include rental properties. Investing in rentals—which is among the most frequently used strategy—basically involves buying homes or apartment communities, advertising for tenants on social media or rental websites, and then renting out your properties for amounts that will cover your mortgage payments and operating expenses with cash flow left over. As an investor, you can choose to manage your properties on your own, but the process may be easier if you hire a property management company to oversee them instead. The property management company can locate and interview potential tenants, collect rent payments, and address complaints that might arise.
Vacation Rentals
Buying vacation rental properties is another excellent component of some real estate investment strategies. After all, many people around the world prefer to stay in homes that are privately owned versus hotel rooms these days. You can simply purchase either a turnkey property or one needing repairs and get it ready for guests. Afterward, you can list your short-term rental on a website such as VRBO or Airbnb. The particular booking agency you use will likely handle correspondence and payments on your behalf for a portion of the profits you receive. Vacation rental properties can be especially invaluable investments if you live in a location that receives many tourists. At the same time, you’ll need to be okay dealing with constant tenant changes, repairs, money handling, and cleaning, for example.
Property Flipping
If you are interested in fix and flip properties — perhaps because you’ve seen it done repeatedly on television — you are in good company. Research shows that home flips reached their highest number in 11 years in 2017 at more than 200,000. If you decide to flip a house, you’ll need to look for properties that need multiple repairs. The great thing about these homes is that you can generally get them for very low prices. You can oftentimes find them on online real estate listings or even via word-of-mouth through local real estate investing clubs. Then, you can fix up the property and sell it for a larger amount than you poured into it. The process can no doubt be daunting, which is why many investors hire professionals to help them with it.
Passive Real Estate Investment Strategies: Real Estate Investment Trusts (REITs)
Passive real estate investing is generally a good option if you don’t have much experience with managing rental properties or if you have significant funds and would like to diversify your income. For starters, you can invest in REITs—companies that finance or own commercial properties via equity investments or debt. REITs usually offer real estate portfolios, rather than single properties, to investors. These companies will basically sell REIT shares to you and you’ll earn dividends on them. The benefit of this strategy is that you can earn money from various properties in a less risky manner than you might with rentals.
Online Real Estate Investing Approach
With today’s increasingly popular real estate investment platforms online, you as an investor locate portfolios that align with your interests and needs. In this way, you can choose which portfolios to invest directly in. Then, the team associated with the platform will identify, acquire, and manage real estate assets on your behalf. These online platforms are a lot like today’s in-demand crowdsourcing platforms. One of the benefits of this approach is that it doesn’t have to cost you a lot of money. In fact, you can begin online real estate investing with a site such as Fundrise, which requires just $500 to get started.
Real Estate Limited Partnership (RELP) Approach
A RELP is a group of people who invest in properties together. Joining these types of partnerships is yet another one of today’s many promising real estate investment strategies. RELPs usually have development firms or property managers as their general partners. Once they are formed, they seek extra financing from investors like you for their real estate–related projects. In exchange, they’ll give you ownership shares, and you can be a limited partner. In this role, your influence on real estate decisions might be limited, but you also limit your liability. Therefore, if your RELP ends up facing a hardship, you won’t be liable for anything beyond your own capital contributions.
