Investing in real estate has become an increasingly popular way for people to make both passive and immediate cash. However, it might not seem that simple when you’re first starting.
There are several types of real estate investments you could make. The trick is deciding which one is right for you.
- Vacation Rentals
If you already own property, you’re off to a great start. Vacation rentals offer you the chance to utilize your home to make passive income through websites such as Airbnb or Vrbo.
However, you may not want to rent out your primary residence. Instead, you can utilize your land to build an accessory dwelling unit. This can be an additional place to rent out while living on the property.
Otherwise, you may also offer the option of renting out a room within your house. This can be listed as a daily or monthly vacation home.
- Purchase Another Property
As a beginner investor, you may want to look into multi-family properties. These are units such as duplexes or triplexes that have multiple units in one building. This is much safer than trying to scale a larger apartment unit.
But another alternative is to purchase a single-family home to rent out. Investors of these types of properties usually have financial stability and a large amount of savings as you’ll be paying for two mortgages at once.
One of the biggest responsibilities is that you’ll now be a landlord. You’ll have to take on issues such as maintenance, leasing agreements, and renovations. Plus, you’ll also need to consider vacancies you’ll experience during the first few months as you search for new tenants.
- Flip a House
This is by far one of the most common types of real estate investments people make when they’re first starting. It can also be the riskiest if you don’t know what you’re doing. Flipping a house is when you buy a property that needs to be fixed up.
You make the necessary repairs and renovations to then resell it at a higher value in hopes of making a larger profit than what you originally invested in. It requires knowledge of the market, working with the right contractors, and having an eye for design.
Be prepared for a lot of work because it’s certainly not a quick turnaround project. But once you get the hang of it, you can easily make upwards of $100,000 or more.
- REITs (Real Estate Investment Trusts)
REITs are the perfect way to start diving into real estate investing without having to own physical property. Companies that own commercial real estate properties such as office spaces or apartments will open up their investment opportunities to the public.
They’re similar to mutual funds where money is collected from various investors. These can be risky, depending on different circumstances such as whether or not they’re public (such as the stock market) or private non-traded investments.
It’s recommended for first-time investors to stick to public REITs as they’re often less risky.
- Online Real Estate Platforms
Online real estate platforms connect borrowers and lenders, or rather developers and investors. But they’re much more of an investment than some of these other options as you can’t easily unload your cash.
The goal is to have borrowers send you a monthly or quarterly distribution of the revenue you generated for the portion of your investment. But the main concern with these types of platforms is that you need to put in a substantial amount of money to see any type of return, or to be accepted in the first place.
Typically, these types of developers require that an individual makes a minimum of $200,000 annually or has a net worth of around $1 million, not including your primary residence.
When you’re first looking into real estate investing, you have to look at your current financial situation. No matter which road you decide to choose, you need money in order to make money.
If you’re not in a stable financial situation or don’t have the excess money to put towards a larger endeavor, you may want to stick with the option of renting out a room within your house. It doesn’t require any additional cash, aside from the necessary furnishings.
For those who are seriously inquiring, it’s best to speak to a lender or broker as to what your available options are based on your current financial standing.