Real estate investment is a broad umbrella that covers many different investment strategies. When creating an investment plan, it is important to look at all of your options and their pros and cons. There are many options you may not have considered, so to give you a well-rounded picture of real estate investment options, I will break down the most common investment types for you.
House flipping is the oldest game in the book. You buy a house (often times at auction), spend a few thousand dollars repairing it, and sell it for a profit. Flipping is great for experienced investors, but it should not be done if it will cause you financial ruin. Flipping works much of the time, but many people have been stuck with houses they can’t flip.
Again, renting is another old but good option, and the most traditional investment strategy. Simply buy a house, condo, or other property, divide it up if necessary, and bring in tenants. You can rent to regular people or lease a space to a company, if you prefer to go the commercial route. The biggest downside is renting to people who refuse to pay or who damage your property.
Developing land into new homes or offices is what developers do. You will have to buy a piece of undeveloped land with the correct zoning code, coordinate contractors, and file all of the paperwork. This is easy to some people, but others find this process a headache.
Did you know you can own a share in a property, just like you would a company? Crowdfunded real estate development projects are becoming more common with the expansion of the Internet. You can put in a much smaller amount (typically no less than $5000) to start, and you’ll receive regular dividends from your property. The downside is it can provide much less revenue and is a long-term investment.
Young couples are taking more to house sharing than ever before. If you have an extra bedroom, you can rent it out to someone and share common spaces, like bathrooms and the living room. If you have a good enough setup, you could also make a traditional apartment for the other person, so there is little-to-no sharing required. This is great for someone looking to pay their mortgage passively, but it can come with annoying roommates or getting stuck with a big bill if your tenant does not pay.
Few companies have grown as fast as Airbnb. If you do not want year-round tenants and would prefer working with people for a short time, listing your property on Airbnb is a good option. The biggest downside is, again, disrespectful clients who may destroy or steal from your property.
Real estate investing is a lucrative option for many people, and there is sure to be an investment type for you. Before diving into the stock market or cryptocurrency, look at all of your real estate options to determine if it matches what you want from an investment.