House flippers are seeing higher than ever profits with an average ROI of 41.3%, which translates to $67,902. This makes the prospect of investing in real estate an enticing one. However, before you jump in and start buying property, you need to know what you’re getting yourself into.
This guide will show you how to buy an investment property and the four ways you can grow your wealth with real estate.
Real Estate Appreciation
The simplest method of real estate investing is the appreciation method. You’ll buy an investment property and then hold it until the value of the property increases due to changing market conditions.
Another method of appreciation is to make upgrades to the home. This can shorten the appreciation timeline. Despite this being the simplest investment method, it’s also a risky one. If you want to reduce the risk, consider investing in a REIT.
A REIT is a real estate investment firm that pools multiple investors’ contributions. The firm invests in larger-scale real estate investments with dedicated account managers monitoring the account.
Real Estate Related Income
If you’re ready to jump into real estate feet first, consider generating an income from real estate-related actions. This involves buying and selling real estate, a commission on helping with other people’s real estate transactions, or providing management services.
The fastest way to make money is flipping. Typically, this is what the “sell my property for cash” services do. They buy property for cash, fix it up with any necessary repairs, and then sell it for more than they paid.
Cash Flow Income
Experienced investors will tell you that the best investment property to buy is one that will generate monthly cash flow. To do this, you’ll buy a rental property, apartment building, storage units, office building, or retail establishment. Secure a tenant for the property that will pay you monthly rent.
This investment method is nice because you can enjoy a monthly cash flow while waiting for the property to appreciate. The drawback is that it requires active management and work to maintain.
Ancillary Real Estate Investment Income
You can make money off of more than just the real estate. Ancillary revenue streams can provide you with a steady income stream. If you invest in an office building, retail space, or apartment complex, you have a captive audience.
Placing vending machines in an office building or laundry facilities at your apartment complex can function as independent mini businesses. This method of generating additional income is relatively low risk since the competition and overhead are low and you have a captive audience.
You Know How to Buy Investment Property
Now that you’ve read this guide, you should have a solid understanding of how to buy an investment property. The first step is to decide how you want to invest. You can do this by determining how much money you have saved up to invest and the level of risk you’re willing to take on.
Check out our other service and business articles for more helpful advice about investing and real estate.