If you want to build a nest egg, consider diversifying your portfolio by investing in real estate. There are many traditional and emerging methods to explore.
Rent a Room
Start small by renting a portion of your home if you want to dip your toe in the rental market. This avenue is an excellent option if you are an empty nester, have an unused in-law quarter, or have an extra bedroom. Renting your space is an ideal way to step into property management because you can start with short-term tenants, and there are plenty of platforms for you to advertise your home on.
Before you begin, install extra safety features, such as a smoke detector, in the rental room, and contact your insurance provider. If applicable, you should check with local planning departments and your Homeowner’s Association (HOA). You can learn if managing tenants suits your lifestyle and personality by starting with this route.
Vacation Rental Investment
A popular concept for real estate investors is buying a property in a remote area or even another country to rent out to people on vacation who want to rent a whole house vs a hotel room or expensive resort condo. Using Casago’s property management services you can practically set it and forget it. They handle the property, and renters, and even know the area your rental will be in. They know the local laws and can take care of the investment for you.
Flipping
People who are handy with tools and numbers can try their hands at rehabbing and selling. Flipping is an art. Take the time to study the market you will be investing in. Conditions can change rapidly in the real estate world. You should have an exit strategy in place, and don’t be afraid to use it. Build a spreadsheet or invest in a system that allows you to calculate repairs and your return on investment. Don’t forget to factor in hidden costs, such as insurance and utilities. Patience is a virtue when it comes to flipping. Take your time selecting the right property in the right neighborhood.
You can use your savings or a private investor to fund these projects. When working with private funders, both parties will need to send money back and forth as you buy and sell. So, how can you transfer funds from one bank to another? According to the experts at SoFi, “an investment company, you can make the transfer through traditional methods, such as a check or wire transfer, or parties can conduct transactions through peer-to-peer services.”
Single-Family Homes
Single-family home rentals are in demand in most cities. You will want to figure out the cost of running the rental. It is more than just rent versus mortgage payment. Rental property loans typically have higher interest rates than owner-occupied home loans, and it costs more to insure the property.
Additional expenses are property management fees and emergency repairs. This type of investment is part of a buy-and-hold strategy, but like flipping, you should have an exit plan if the rental market sours.
Multifamily Units
The benefits of investing in single-family homes are you only have to deal with one tenant and one house at a time. The return can be great when working with duplexes, fourplexes, and larger apartments, but so can the headaches. Over time, apartments can be a great source of passive income. You might opt for a live-in manager who can handle some repairs and collect the rent. These managers can keep a close eye on the property.
There are tax benefits. Most people can write off the management fees and repairs. This benefit may also be available to individuals that hold single-family rentals.
When venturing into this investment arena, individuals should go in with realistic expectations. Start by educating yourself, and with a bit of persistence and assistance, you could find yourself holding valuable assets.
