“No one ever got rich working 9-to-5” is an oft-repeated phrase designed to inspire people to leave their day jobs and aim for something greater. If you count yourself as one of those who would want to leave the daily grind and strike out on their own – or at least seek out an alternative source of income – you might want to learn more about real estate investing.
Real estate investing is defined as buying real estate property for the purpose of turning a profit, which can be earned through rent, future resale, or both. It can be a long-term or short-term endeavor, with each type offering its own set of benefits and pitfalls. As you embark on your real estate investment journey, it pays to know the four different ways you can get your foot in the door.
- Rental properties
Rental property investment is the most common type of real estate investment because almost every kind of residence can be a rental – single-family homes, townhouses, condos, etc. This type of real estate investment is ideal for those who want to invest in the long term. It also suits those with handyman skills and the patience to deal with tenants. Rental properties can be a good source of income as long as you learn how to manage long periods of vacancy, uncooperative tenants, and the maintenance needed to keep the facilities in top shape.
Flipping is a short-term real estate investment in which the investor purchases a fixer-upper, renovates it, and then sells it for profit. Flipping is not recommended for greenhorn investors. It requires experience and a keen understanding of the local real estate market to identify the kind of fixer-up that will yield the best results. It also tests your mettle when you have to deal with the unexpected – like coming across lead paint or ancient electrical wiring that badly needs an upgrade.
Ease into the line of work you’re aiming for. Undertake two or three renovation projects before you commit to flipping. This is why contractors, real estate agents, and long-time investors are the most suited for this type of real estate investment.
- Real Estate Investment Trusts (REITs)
A Real Estate Investment Trust is a company that pools money from multiple investors in order to buy and manage large investment properties such as condos, office spaces, and other commercial establishments. Investors receive their share of the profit in the form of dividends. REITs are ideal for those who want to put their money on a project they would not otherwise have the capital for. It’s also great for investors who do not want to deal with the hassles of regular real estate transactions.
Real estate wholesaling means going into an agreement with a homeowner to sell their property within an agreed-upon time period. You make money by offering the property to a buyer for a higher price than what the owner is asking for. While it doesn’t require a lot of capital to begin with, this investment option needs time, patience, and a network of investors who may want to buy the home you’re selling in order to flip it.
Whether you’re ready to take the real estate investment plunge or just want to learn more, top Sonoma County Realtors like Brad Wilkinson, can provide you with the guidance and information you need to move forward with your plans. Get in touch with him at 707.799.0455 or Brad(dotted)Wilkinson(at)cbnorcal(dotted)com today