Deciding how to invest in real estate means analyzing property types, strategies,
potential risk, funding sources, average returns, and timelines.
The most common ways to invest in real estate, including:
- Flipping houses
- Rental properties
- Buying vacation rental property
- Purchasing commercial real estate
Fix-and-flip investing is best for experienced, short-term investors wanting to
purchase, renovate, and sell a property quickly.
Flippers look for distressed properties with equity potential that can be flipped in 12 months or less for an average gross profit of 15% to 20%.
Rental property and Real Estate investing is best for passive long-term investors
looking to purchase residential rental property, and it is a popular strategy
for real estate beginners.
Long-term rentals offer better financing options and lower equity requirements, making entry into
these investments easier.
These properties include single-family homes, apartment buildings, and multifamily units.
Vacation rental property is a property an investor buys to use as a vacation
home and also to rent out to offset the costs of ownership.
It’s typically purchased in an area that has tourist attractions and amenities. Most investors hire a management company to handle marketing,
scheduling, upkeep, and rent collection. Conventional financing terms are available for most second home rentals.
Commercial properties are purchased by investors and leased out to companies,
and include office spaces, restaurants, and retail stores.
Commercial real estate investors are mostly long-term investors looking for monthly lease income and price appreciation. Commercial investors
can use traditional long-term loans or commercial hard money lenders for fix-and-flips.
There are several alternative ways of investing in real estate. These generally include real estate crowdfunding, investing in real estate investment
trusts (REITs), and tax liens. Each of these alternative investments have their own risks and rewards and are generally right for different kinds
Real estate crowdfunding companies provide opportunities to invest in loan-backed, single-family homes, apartments, condos, and multi-unit
properties. REITs are corporations that own or finance income-producing real estate. They typically own a portfolio of real estate within a
specific sector and generally pay out 90% of annual profits to investors.