There is no doubt that real estate is a lucrative business, which is why, many real estate big-shots are listed in Forbes’ list of richest people in 2020. But, investing in real estate is a rather scary proposition because it is an incredibly complex business area, and can easily overwhelm a novice investor.
First and foremost, you must understand various types of real estate investments so that you can evaluate the type of investment you wish to make in this business. After that, you can follow all the tips and tricks for your selected investment type so that you do not end up making any rookie mistakes. Therefore, we have discussed here four most common types of real estate investments so that you know where to begin your journey in the real estate business.
- Long-Term rental properties:
Investing in long term rental properties is one of the most common type of investment, and it is popular among those real estate investors who want to enjoy a passive income without having to do much. But, becoming a landlord has its challenges and it is not as convenient as it sounds, especially if you get stuck with some iffy tenants.
Therefore, invest in long term investments only if you are sure about becoming a landlord. Moreover, it would be best if you rent your properties on a triple net lease (NNN). You can get more info on nnn type agreements by contacting some real estate experts.
- Short-term rental properties:
With the rise of websites like Airbnb, renting properties to long term tenants have become a bit obsolete. Now, you can rent your properties on short term basis by simply listing them with websites like Airbnb, who will enable you to rent it to short-term vacationers. But, it is not only sunshine and rainbows with such rentals because it has its own trade-offs.
For example, you will be able to charge more on a per-night basis, but the occupancy rates will be lower. Moreover, you will also have the extra headaches of cleaning the property between bookings, maintaining it, and paying for its utilities. Therefore, if you wish to successfully execute such ventures, you will have to treat such investments like a business, and not like a passive income.
- House flipping:
House flipping has become quite popular among the various investors. The basic idea is that you buy a run-down home, renovate it extensively to increase its valuation, and list it in the market to earn big profits. But, there are some strategies that you must always deploy like buying the cheapest property in the nicest neighborhood. Moreover, only buy properties that need only cosmetic changes like renovating the cabinets, slabs and repainting the walls so that the renovation costs does not eat into your profits.
- Real Estate Investment Trusts:
It is a type of security traded on public stock markets. The REIT fund utilizes its capital to invest in real estate either directly by buying real estate or indirectly by lending for mortgages against real properties. One advantage of REIT funds over traditional stock funds is that they yield high dividends as they are legally bound at disburse 90 percent of their profits to shareholders.