Real estate is often a desirable choice for investing because of its potential to add income to a financial portfolio. As an appreciating asset, it can also be a continuous source of generated income, whether you invest in residential, commercial, or undeveloped properties.
Many people believe that to begin, you need a cash reserve, good credit and assets. However, you can get started with just a few hundred dollars when opening an escrow account, and if your funds are limited, you can potentially secure financing from several sources, such as an FHA loan, a hard-money lender, a home equity line of credit, a personal loan, or a cash-out refinance.
- House Flipping: Purchasing a run-down property can be a great way to begin investing, but unless you are an experienced contractor, it’s best to consult with a qualified one to help estimate what it will cost to complete the project of bringing the home up to normal standards. You will need to receive enough profit to cover the costs and fund your next investment.
- Commercial Real Estate: You can invest in a variety of commercial real estate properties, such as shopping centers, warehouses, industrial parks, or dwellings that have five or more units. Some of the benefits include a regular rental income stream, the potential to earn a higher income, less competition, and longer lease terms.
- Lease Options: If you’re a first-time homebuyer without enough credit to buy a home through a bank or lender, this arrangement is the perfect way to get started in real estate. The owner will not only rent their property to you but also give you the option to buy it at a present price when the lease agreement ends. You can save more money and build credit to qualify for a loan.
- Long-term Rentals: This is traditionally a popular method of getting into the real estate market. The goal is to make the property an appreciating asset that will build your real estate portfolio. When selecting a property, the most important consideration is location: the more desirable the location, the higher the future rental income and potential selling price.
- Vacation Rental: This investment can be a good one, but before making a purchase, weigh its potential as rental income versus its costs, which include purchase price, maintenance, and fees associated with ownership (insurance, taxes, HOA dues). Research the market to determine the best time to purchase and when to raise rental prices to make your investment worthwhile.
Most importantly, a real estate agent is a valuable asset to help you on your journey from start to finish!
Some information details are courtesy of Good To Be Home Magazine.