There’s not just one way to invest in real estate. Today I’m sharing several, each with their own pros and cons.
Here are the four main ways to invest in real estate:
1. Buy a home and rent it out. This approach has so many positives. Having a tenant’s rent payment go toward your mortgage is huge. The negative thing is that sometimes tenants can cause headaches or repairs will be needed more frequently than expected. Make sure that if you do add a property management company to this equation, they’re the most professional option available.
2. Flip a home. This extremely common approach (all the rave on TV right now) has the plus of making a decent profit—if and only if things are done properly, though. With the average price point in San Antonio jumping to $270,000 over the last few years, we’re starting to see a lot more flips here.
If you’re interested in flipping, know that you need to pay attention and make sure that the handyman you’ve hired is doing a good job and that they’re pulling permits, which is a big deal these days in our area. You also have to wield enough market knowledge to be able to buy low and sell high.
3. Look at an investment group. This more passive approach may involve less capital and offers a low-difficulty way to enter the investing world. The trick is that you’ll have to first find a group, then determine who will lead the group; are you going to be a passive investor, or will everyone have an equal say? It can be tough to get these off the ground.
4. Check out an REIT. A real estate investment trust (REIT) is similar to buying a mutual fund. Probably the most simple of the four options, an REIT is a great way to diversify your portfolio. Do be aware, however, that many REITs have small fees associated with them that big investor groups use to nickel and dime you, so you might not have as good of a return as you’d initially think.
If you have additional questions about the information covered in today’s message, feel free to call or email me. I love talking about investing, so we could explore which route is best for you.