Just like other forms of investing (such as stocks and bonds), real estate investing can be a profitable source of passive income. While it seems overwhelming to a beginner, real estate investment comes in multiple forms and can be as hands-on (or not) as the investor desires. Other added bonuses include a reliable and consistant cash flow, tax deductions, and capital appreciation. 

Types of Real Estate Investing

Home Ownership

Buying a home, and actually paying it off, is a big step towards financial freedom. Once your home is paid off, you only have to worry about property insurance and property taxes. Buying a home during a buyer’s market and selling during a seller’s market is the best way to profit if you are looking towards more than just totally owning your home. There is always a risk with having a mortgage, but once it is paid off it provides a lot of financial relief. You could even turn it into a rental should you choose to widen your real estate portfolio.

House Flipping

House flipping is essentially buying a property (often a bankruptcy or “fixer-upper”) and fixing it up so you can then turn around fairly quickly and sell it for more than you invested in the first place. This option is good for people who either are handy and have DIY knowledge or those with resources to hire professionals to quickly update and renovate the property. The house is then listed back on the market for more than the investment, making it a lump-sum and fast cash turnaround rather than a monthly passive income.  You can even utilize sites like Homewyse to project costs of upgrading, buying, and maintaining properties. Check out this homewyse tutorial to get an idea of how it works investing in a property to flip.

Rental Properties

Investing in a rental property such as an apartment building, storage units, or even a smaller investment such as vending machines inside of buildings. Some people start small with things like vending machines, and use the profit to invest in larger buildings such as an apartment building. Rental properties offer a monthly cash flow, and you can choose whether to utilize a property management company or just maintain the property yourself. Property managers handle the day-to-day operations, making rentals a hands off investment.

Real Estate Investment Groups (REIGs)

Real estate investment groups are like mutual funds, where multiple owners go in on a property (or properties) and it provides a shared financial risk (such as vacancies) but also provides a much more hands off approach to real estate investment. While one real estate investor can decide to own one or more units, the group handles the maintenance and day to day operations.

The risks of investing in real estate are like any other, you take a financial risk but the gain is worth it in the end. Certain investments are much riskier than others so you have to decide what is right for you. Do your research and make sure any company or contractor you work with has a reliable reputation.