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If building wealth is your goal, and it probably is, you need to consider various strategies, from tracking your spending habits to shoring up your emergency fund. Having moved beyond those beginner steps, however, you will want to set your sights on something bigger to invest in. The perfect vehicle to propel your money forward toward greater gains is real estate. There are several ways you can invest in property and landholdings. Continue reading to learn more.
Consider Wholesaling Real Estate
Wholesaling property can be a lucrative investment opportunity and a smart solution to diversify your portfolio when done correctly. It is a proactive way to capitalize on fluctuating real estate markets. In addition, wholesaling property is generally a low-risk endeavor as wholesalers routinely assign a contract directly to a buyer without actually taking ownership of the property themselves. Through this tactic, wholesalers are often protected from the potential for devaluation or a drop in the real estate market.
Be mindful of the state laws regarding wholesaling property. Always research the local laws to answer the question, “Is wholesaling legal?” Since laws vary from state to state, you need to ensure you understand the nuances, especially if you are an out-of-state investor and are unfamiliar with the statutes and state business model surrounding a property you are interested in. Making informed investment decisions will help save you time, money, and unnecessary headaches.
Learn About Flipping Houses
With the abundance of home improvement television shows and streaming how-to’s online, everyone wants to get into the business of flipping houses. The people on your screen make it look easy and sometimes even fun. Make no mistake, however, it is a lot of work. This is especially true if the flipper lacks experience in home repairs and improvements. It is important to note that many of the people singing the praises online about their success stories are highly skilled in the trades or have a behind-the-scenes team that bears the brunt of the skilled work when the camera is turned off.
That point being made, if you have the drive and skills to tackle a home improvement project and bring a derelict or out-of-date home up to code, flipping houses may be a viable way to earn money relatively quickly. Once again, research is essential here. Understand what type of repairs and updates a home will need before investing so you can properly assess your target purchase price, the estimated cost of repairs, and the final sale price to determine if the return on investment will earn you a profit on a particular property.
Become a Hands-On Landlord
If you have the time, motivation, and interest in turning a property into a rental property, you might consider becoming a hands-on landlord. With this, you opt out of using a management company as the go-between for you and your tenants. Instead, you are the first point of contact for repair requests, middle-of-the-night emergencies, and payment questions. Having the time and abilities to take on this role can be lucrative as you avoid paying a third party to do the work for you.
Here are some essential points to adhere to in any landlord-tenant scenario.
- Understand the landlord-tenant laws that regulate the rental property.
- Consistently follow the fair housing laws outlined in the Fair Housing Act to avoid running afoul of the law.
- Always require renter’s insurance and insist upon proof to ensure all party’s property and rights are protected under this specific insurance umbrella.
- Obtain landlord insurance to ensure your rights and property are protected from potential risks.
- Always conduct a thorough and professional background check on every prospective tenant. This will alert landlords to past eviction notices and criminal history, in addition to credit and work histories.
- Use a secure online payment system set up on autopay to avoid rent payment delays, the need to visit each tenant in person to collect rent, or to deposit checks every month.
As with any rental property, assuming it is in good condition, the landlord will generate consistent returns as long as the rental units or rooms are filled with paying tenants.
Watch this video to learn about a financial expert’s experience as a first-time property investor.
Property Management Company
If you have neither the time nor the inclination to manage your rental property on your own, you can always seek the services of a professional property management company. Of course, one of the biggest detractors of working with a property management company is their fee. This fee covers the cost of their overhead and the repairs and upkeep on your property. Some management companies only take their fee when a unit is occupied.
By diversifying investment portfolios and incorporating wholesaling property, savvy investors can add stability and potential growth year over year. Do your due diligence to thoroughly understand what you are taking on in the wholesaling arena and understand what it means to be a landlord, whether you are considering a hands-on or a managed approach. Be mindful of market fluctuations and time your buying with the power of low prices so you can watch your real estate investment portfolio grow.
When looking for a property management company, always conduct detailed and meticulous research on the company itself. You want a partner, not a problem. Ask them to look at their repair records and receipts. If one unit’s tenant consistently requests a repair for the same problem, that might be a sign that nothing is being fixed. Also, look online for reviews. Since people tend to post their grievances, you can learn a lot about a property management company that way. Tour the management company’s other properties to learn how they conduct business, their response times for repair requests, and to get an eyes-on assessment of the state of the buildings.
The takeaway is if you want to invest in rental property and all or most of the units are consistently occupied by paying renters, this can be a reliable way to passively earn income for many years.
