Contrary to popular belief, mastering the real estate market isn’t just about finding your lifelong home and buying it. Instead, it’s all about building a portfolio that will eventually become passive income. Or, building a portfolio that will increase in value and ultimately allow you those big purchases upon retirement.
Bearing this in mind, today’s article is going to take a look at some of the ways you can invest in the real estate market. It’s certainly more diverse than you might think, and we’ll now look at the three ways which tend to be at the forefront of most investor’s minds.
The basic rental solution
According to Pedro Martin, this is one of the most common approaches. The basis of this is a person acquiring a property, before renting it out and collecting the income. They will of course be responsible for the financing of the property, usually in the form of a mortgage, but more often than not the monthly rental figure surpasses this.
Of course, like most forms of investment, there can be risks attached with this approach. Firstly, you might find it difficult to find a tenant, or there might be long periods in which the property is vacant and you are not receiving an income. At the same time, if you do get a tenant, they might be a bad one and cause damage to the property that you will obviously have to pay for.
Real estate trading
On the flip side, we have real estate trading. For those of you who like a little more risk, there’s no doubt that this form of investment can be very enticing indeed. Instead of renting out a property that you have bought, the intention here is to sell on the property in record speeds with the hope of turning a profit. Some guides might also refer to this as flipping.
Of course, you will usually have to improve the house in some regard for putting it back up for sale again.
It should also go without saying that risks still exist in this form of investing. There might be occasions where you struggle to sell a property, and this can leave you with a monumental cash flow problem that you will need to resolve.
Real estate investment groups
The last approach we are going to talk about comes in the form of real investment groups. In some ways, these can be described as mutual funds.
The way in which they work is that a holding company will purchase a block of apartments, before giving investors the opportunity to buy them. The major benefit here is that investors don’t have to deal with the hassle of maintenance of any other landlord issues. At the same time, it won’t be a surprise to hear that you’ll tend to pay a premium for such a service, and this will ultimately eat into your yield. Usually, these companies will charge a percentage of the rent you are receiving from tenants.