Many people say that they want to invest in real estate as a way to diversify from stocks and bonds. The challenge is knowing how to get started. After all, what works well for one person may not be a good fit for another. Fortunately, there are a few different ways to invest in real estate. Here is an overview of the three most common paths to take.
1. Rent out a part of your home
If you’re hesitant to go “all in” with real estate investing, renting out a part of your home may be a good way to test the waters. If you’re an empty-nester, you could opt to rent one of your extra bedrooms. Or, if you have some space you’re not using, like in a basement or above a garage, you could remodel it into a studio or one-bedroom apartment. If you discover that being a landlord isn’t for you, once the person’s rental agreement is expired you have your entire home back, and there’s nothing that you have to sell or pay for while it’s on the market.
2. Buy a rental property
If you want to invest in real estate but the idea of having a tenant in your primary home doesn’t appeal to you, your next option is to buy a house, condo, or townhome and rent it out. This option requires a little more upfront investment, but it has the potential to give you much greater rewards in the long-term. The key to making this work is to buy a home where your monthly expenses (mortgage, taxes, and insurance) are less than the current market rent rate. Sometimes you can even find a home for sale that already has a tenant in place, thus making your start up time and requirements much less.
3. Flip a property
Property flipping is all the rage on TV. And there’s good reason for all the drama. Property flipping can be risky, but the rewards are definitely possible. To make property flipping work, you need to find homes that have been sitting on the market for a while or homes that need some cosmetic repairs that many people aren’t willing to jump into. If you can do some or all of the repairs yourself, or if you’re very careful about what you buy, this can be a fun and rewarding way to invest in real estate.
Taking the plunge to invest in real estate is both exciting and scary. Work with a Realtor to help you mitigate the risk and make wise decisions. When done correctly, real estate investing offers great rewards and long-term profits.
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