Investing in real estate is often considered to be one of the safest options for anyone who can afford it, and this usually holds true, but with so many factors at play when investing in real estate, things can go south pretty fast, and a poor strategy is the most common cause.
Before you get down to the details, your first step should be figuring out which real estate investing strategy fits your financial abilities and goals the best way possible, and this hinges on your risk tolerance, business structure, financing, etc.
Fix it and flip it
The most common real estate investing strategy is fixing and flipping, which refers to buying a property or a home in poor shape for a low price, making the necessary repairs at a minimal price, and then selling for a huge profit.
However, while it sounds like a foolproof plan on paper, the reality of it is far from simple, as experienced investors always do their due diligence before committing to a piece of real estate.
In this case, due diligence is knowing the neighborhood as the location is key to real estate investments, and if you’ve already got that covered, make sure you have a solid understanding of construction, as it’ll help you hire the right team, rehab the property and finally sell it for a profit.
Buying and Holding
Buying and holding, on the other hand, is the exact opposite of the previously mentioned strategy, and it’s recommended for those looking to rake in those sweet long-term gains.
Every veteran will tell you that get-rich-quick schemes only work for a short period of time before running out of gas and that it’s slow and steady that wins the race.
However, this doesn’t mean you can’t keep your piece of real estate in good condition, because any minor damages to your asset might scare off potential renters and cost you a full month of potential gains.
In any case, real estate appreciates over time, and with thorough research on your investment before diving in, you could easily set yourself up for decades of returns if you play your cards right.
Commercial real estate
Finally, the most profitable option in the real estate market has always been commercial real estate, which can bring in massive returns, albeit at a greater risk.
The benefits are that the return rates are between 6% and 12%, and your lease for the property is not subject to consumer protection laws that apply to residential leases, providing you with added flexibility.
However, the downside is that your initial investment is astronomically larger than for any other real estate options, with insurance costs and time commitments following suit.
This option includes but isn’t limited to: Apartment complexes, hotels, industrial buildings, offices, retail, and warehouses.