Real estate is a sure-fire way to increase your overall investment strategy. If you are able to detach yourself from the property itself and spot up and coming areas to invest in, the real estate market becomes like the stock market. Your house is your investment. However, unlike the stock market or investors, real estate owners can use their leverage to buy a property. This can be done by paying for some of it up front, then getting a mortgage and paying the balance off, plus interest over a period of time.
Getting out a mortgage is a great way to supplement the outstanding balance of a property. This will usually require you to put down a 20-25% deposit, however sometimes this can drop as low to 5%. As soon as you have gone through this process the house is yours. This means you can start making some serious money via a myriad of outlets very easily.
Becoming a Landlord
If you are able to get through this process and come up with initial deposit you can rent out that property. Becoming a landlord for one or more properties is a great way to earn money on your investments. It is a great opportunity for the more skilled person that can renovate properties and perform DIY activities. They would need to have great people skills and communication skills to interact with tenants.
Whilst this will reap great rewards, the investor must have enough capital to cover the start up costs and potential maintenance costs. You may also be without a tenant at times, which could implicate your investment capabilities. Ensure that you have enough money to fund any unprecedented times.
Benefits
- You get a regular income from multiple renters.
- Your property can always gain more value over the years.
- You can maximise capital through leverage.
- There are many tax-deductible associated expenses associated with renting.
Drawbacks
- It can be hard to manage tenants.
- Tenants may cause damages to the property.
- It is hard to predict your potential earnings.
Flipping Houses
This option is great for those with a lot of experience in real estate and understanding of the market. Whilst it will make you a potentially huge profit, it does require a lot of capital and experience. Nevertheless, this can be a great, lazy investment for those that know what to do. This is considered a very risqué investment technique, but the rewards are so inviting.
In essence you will look to purchase a property that needs work, or has been undervalued. Then you will renovate, decorate and revamp the house, this will hopefully increase the properties value and leave you with a big profit. Flipping houses usually have deadlines, many people aim to resell their house in under six months. Any longer and the outgoings may cause some financial stress to the buyers.
Benefits
- Easy way to earn a huge potential profit.
- Your capital is tied up for a short period of time.
- It offers the buyers quick returns.
- This is a great investment opportunity for an experienced buyer.
Drawbacks
- This requires a lot of market knowledge.
- You must know how to renovate a house.
Real Estate Investment Groups (REIGs)
This is a great opportunity for those hoping to own real estate without all of the hassle taken to running it. This does require a lot of capital and access to financing. REIGs are small funds that are used to help invest in rental properties.
A single investor in the REIG’s can own one or multiple units of self-contained living space. The company operating the investment group collectively manages all of the units, handling maintenance, advertising vacancies, and interviewing tenants. In exchange for conducting these management tasks, the company takes a percentage of the monthly rent, but these are not crippling amounts.
Benefits
- It is one of the easiest ways to make a profit on a rental property.
- There is a good return in investment.
- They are a good group to be involved in.
Drawbacks
- It requires a big initial sum of capital.
- There are some vacancy risks.
Online Real Estate Platforms
These real estate platforms are great for those investors that are hoping to join others that are interested in investing in large scale, commercial properties. They are a kind of real estate crowd funding system, these deals are usually completed online. Whilst it does require a large amount of investing capital at first, it is still less than the amount required to purchase a house outright.
This is a great way to connect with likeminded people, open your options to many various avenues and to diversify your initial investments. The best part about this is that this it requires little effort and not that much of an investment to start it up.
Benefits
- You can diversify your initial offering.
- It is easy to meet and learn about new offerings.
- You can invest in both single and portfolio projects with ease.
Drawbacks
- There are hidden management costs.
- It requires initial capital.
Conclusion
Becoming a real estate investor can be quite a stress free experience with the right knowledge. The best way to gain capital on your investment is usually by doing the easiest things, anything over complicated will always cause some issues. Remember to stick to your strengths and focus on your passion first. Real estate can be quite a risky market to get into but the rewards far outshine the risk. Even for a lazy investor, the potentials are huge.
