{"id":805,"date":"2020-08-26T10:50:57","date_gmt":"2020-08-26T09:50:57","guid":{"rendered":"https:\/\/www.propertyunder20k.com\/blog\/?p=805"},"modified":"2020-08-26T10:59:08","modified_gmt":"2020-08-26T09:59:08","slug":"how-and-where-to-invest-in-real-estate-the-4-best-ways-to-profit","status":"publish","type":"post","link":"https:\/\/www.propertyunder20k.com\/blog\/2020\/08\/26\/how-and-where-to-invest-in-real-estate-the-4-best-ways-to-profit\/","title":{"rendered":"How and Where to Invest in Real Estate: The 4 Best Ways to Profit"},"content":{"rendered":"\n

It\u2019s not a secret\nthat real estate can yield bigger profits than most businesses, but did you\nknow that you can earn in this market even if you don\u2019t sell a house?<\/p>\n\n\n\n

If you have ever\nexperienced having a landlord, there\u2019s a good chance that you have observed how\nchallenging it is for them to field calls from tenants all day about\noverflowing toilets or giant bugs. But while it may not seem like the most\nglamorous job, being a real estate\ninvestor can be quite lucrative<\/strong>.<\/p>\n\n\n\n

Aside from renting\nout a place, there are plenty of ways that you can get a significant return on\ninvestment in real estate. The only problem is that not all investors\nunderstand how they can do so, or even know which investments can get them a\nsignificant ROI.<\/p>\n\n\n\n

If you\u2019re new to the trade, this article is for you. Read on to learn the four best ways to profit by investing\nin real estate<\/strong>.<\/p>\n\n\n\n

1.  \nBuy a rental property<\/h2>\n\n\n\n

This is probably\nthe most straightforward method of becoming a real estate investor. \u2018Investment\nproperty\u2019 refers to any commercial or\nresidential property to be rented out to tenants <\/strong>without any additional\nfixing or flipping.<\/p>\n\n\n\n

When you own a\nrental property, you don\u2019t just get what you paid for, but you also build\nwealth-generating income. Add to that equity appreciation and the leverage you\nhave with real estate, and you have yourself a solid investment.<\/p>\n\n\n\n

Still, it is worth\nnoting that owning a piece of rental property may not be for everyone. When\nlooking for houses or apartments\nfor sale<\/a>, you have to make sure that you\nconsider your interests, lifestyle, and the potential drawbacks, including:<\/p>\n\n\n\n

\u25cf     \nTime commitment<\/h3>\n\n\n\n

Owning a property\nand renting it out to tenants requires\ntime<\/strong>, even with the help of a property management agency. Make sure that\nyou can accommodate this in your schedule. Otherwise, it would be best to try\nsomething else.<\/p>\n\n\n\n

\u25cf     \nCost barriers<\/h3>\n\n\n\n

Another major\nconcern most investors have about a rental property is the cost of buying<\/strong> one. If you\u2019re taking out a loan for it, many\nlenders require a minimum of 25 percent down payment for an investment property\nloan. Thus, it would be better to consider undertaking this type of real estate\nventure if you have reserves worth several months\u2019 expenses.<\/p>\n\n\n\n

\u25cf     \nUncertainty of yield<\/h3>\n\n\n\n

Although many\nrental properties provide a continuous source of income for many (especially if\nyou pick an apartment in a highly desirable location, like a Business Bay property in Dubai<\/a>, for example), it isn\u2019t a 100% done deal. Vacancies can\nhappen, and things may break. Although there is great potential in this sort of\ninvestment overall, there are considerable short-term\nrisks<\/strong>.<\/p>\n\n\n\n

2.  \nInvest in real estate\ninvestment trusts (REITs)<\/h2>\n\n\n\n

Real estate\ninvestment trusts or REITs allow investors to put in their money and let it\ngrow without actual, physical real estate.<\/p>\n\n\n\n

Although usually compared to mutual funds<\/strong>, REITs\nare actual commercial real estate properties like retail spaces, office\nbuildings, apartments, and hotels that yield income through leasing. The\nrevenue gathered through these properties is divided amongst the REIT holders \u2013\nalso called \u2018trustees\u2019 \u2013 in the form of a dividend, which they can\nautomatically reinvest to allow it to grow further.<\/p>\n\n\n\n

But while REITs are\nan excellent way to invest in real estate for people without the time to handle\nrental properties, they can also be complex\nand varied<\/strong>. Some of these are traded on an exchange the same way stocks\nare, but others aren\u2019t publicly traded. This means that the kind of REIT you\ninvest in is a huge factor in how big a risk you\u2019re taking when engaging in\nthis form of real estate investment.<\/p>\n\n\n\n

3.  \nPurchase a vacation rental<\/h2>\n\n\n\n

Vacation rentals\nare quite different from the rental property mentioned previously. While the\nlatter involves having long-term tenants, vacation rentals are only occupied by\ntenants on occasion.<\/p>\n\n\n\n

One of the perks of\nhaving this type of investment property is that you can use it as your second home<\/strong> when it is vacant. It would also be easier to finance<\/strong> vacation rentals\ncompared to long-term rental properties, particularly if your lender considers\nit your second home as it means you don\u2019t need to use the rental income to\nqualify for the loan.<\/p>\n\n\n\n

Moreover, these\nproperties usually bring in higher\nrental income per day<\/strong> compared to long-term rentals.<\/p>\n\n\n\n

But, like other\ninvestment options, vacation rentals also have some disadvantages.<\/p>\n\n\n\n

For one, marketing\nand managing this type of rental property requires\nmore involvement<\/strong> on your part compared to those leased out long term.\nBecause of this, the cost of property\nmanagement is a bit higher<\/strong>, with many property managers expecting to get\npaid 25% of the total rent. This is more than twice the 10% standard for\nlong-term rentals.<\/p>\n\n\n\n

4.  \nFix and flip real estate<\/h2>\n\n\n\n

If you\u2019re a fan of\nreal estate TV shows, then you\u2019re probably familiar with the term \u2018fix and\nflip\u2019 or the act of \u2018flipping houses\u2019. Fixing and flipping a property means\nthat you buy a home for the sole purpose of refurbishing it and selling it\nquickly for a profit.<\/p>\n\n\n\n

This particular\ninvestment option can be quite a lucrative option in real estate, especially if\neverything proceeds as planned. After all, what better way to earn some cash\nthan by buying an underpriced home,\nshowing it little love through inexpensive renovation, and reselling it for a\nhigher price?<\/strong><\/p>\n\n\n\n

However, this\nstrategy is a little bit harder to accomplish in reality compared to how they\npresent it on TV. First, it comes with a higher risk as the maths behind\nflipping properties means you have to be very accurate in your estimated cost\nof repairs. That alone is a challenge in itself.<\/p>\n\n\n\n

Plus, flipping homes is a job <\/em><\/strong>that requires not only your attention but a lot of time as\nwell. This means that if you\u2019re a passive investor, you should consider another\ninvestment option.<\/p>\n\n\n\n

Remember that\nfix-and-flip investments can be quite daunting, even for the most experienced\nprofessionals. In fact, even the people you see doing this on TV require a team\nof four people or more, with varying\nexpertise in real estate marketing, civil engineering, interior design, and\nothers<\/strong>.<\/p>\n\n\n\n

There are also some\nrules you must know about before deciding to jump into the fix-and-flip\nbandwagon:<\/p>\n\n\n\n