Investing in Rental Property: 7 Ways to Get Started in Real Estate
Did you know the U.S. housing market is currently worth more than $43 trillion and has doubled in value since 2010?
Now is the time to start investing in rental property, but if you’re new to real estate investing, it can be difficult to know where to start.
You’ll need to get a good handle on your finances and learn where the best investment opportunities lie.
Keep reading this guide to learn about seven ways to get started in real estate investing today!
1. Buy a Rental Property
Buying a rental property like a single-family home or a town home are great ways to invest in real estate.
Investing in these types of rental properties allows you to earn a passive income through monthly rent payments.
Other benefits include:
- You’ll build equity and profit from the property if you sell
- You have complete control over tenant selection and pricing of the units
- The interest paid towards an investment property loan is tax-deductible
In addition to tax-deductible interest, there are several other tax deductions you can take advantage of as a landlord, like maintenance, repairs, and advertising costs.
If you’re looking to invest in a larger development project, you can check out the townhouse builder for tips on finding the right builders.
2. Lease to Own
Leasing properties is a great way to get involved in real estate without spending a large amount of money upfront.
If you don’t have much money for a down payment or need to improve your credit score, leasing to own is a smart option.
You’ll sign the lease with an option to buy later at a preset price. If the property market climbs, you’ll make a good investment by being able to buy the property at a discounted price. You can also decide to sell your right to purchase the property to someone else.
Finally, you’ll typically have the option to sublease the property without actually living in it. That way, you can earn income from it while deciding whether it’s worth buying.
3. Buy Real Estate Investment Trusts (REITs)
REITs offer you the opportunity to invest in real estate without having to own any physical property.
A REIT has at least 100 investors that form a company. They typically own commercial or residential real estate spaces. They use investors’ money to buy, sell, and operate these properties to produce a profit.
These types of investments are much like mutual funds and combine the capital of many investors. This makes it possible for you to earn dividends from different real estate investments.
REITs enable anyone to start investing in commercial real estate, and you can buy or sell them anytime you want.
4. Use Online Real Estate Investment Platforms
If you’re interested in investing in larger commercial or residential properties, you can connect with real estate developers looking for financing on real estate platforms like Prosper and LendingClub.
However, many of these types of platforms are only open to accredited investors who’ve earned more than $200,000 in the past two years or have a net worth of over $1 million.
You can find alternative platforms that have lower income requirements, like RealtyMogul, but you’ll have to do your research.
5. Invest in Vacation Rentals
Vacation rentals are among the best types of investment property you can turn to. It’s a smart way to start developing a passive income, and potentially you can make a significant amount of money.
You can look at popular tourist destinations like Los Angeles or Miami that have a high demand for short-term vacation rentals to increase your profits. Then you can regularly advertise on different vacation rental platforms or even create your own website.
Also, if you rent out your vacation home for at least two weeks each year, it’s considered a business, and you’ll be eligible for rental property tax deductions and can write off many of the expenses.
Don’t forget that owning your own rental property also allows you to have a second home when you need a vacation. It’s also an excellent long-term investment because if you decide to keep your vacation home instead of selling it, you’ll have a future retirement home ready to go.
6. Invest in Commercial Real Estate
Investing in commercial real estate is one of the most profitable investments because you can make a monthly income and benefit from sale profits.
Commercial real estate investing not only focuses on fixing and flipping properties, but also on developing them and adding value through upgrades and renovations.
You can start investing in retail office spaces to establish yourself, then grow into investing and developing large-scale buildings like shopping malls.
7. Start House Flipping
If you have experience with home renovations or can partner with an experienced contractor, house flipping can be a great way to invest money in the real estate industry.
One investment strategy used in flipping is BRRRR, which stands for Buy, Rehab, Rent, Refinance, Repeat. This method targets properties that are in foreclosure or up for auction.
You can buy these types of properties at a low price and flip them into rental properties. This rental income allows you to pay off the mortgage, and once you build enough equity, you can refinance and put the cash savings towards another property.
Once you can repeat this process enough times, you’ll eventually end up with a profitable real estate investment business.
Start Investing in Rental Property Today
With these property investment tips, investing in rental property won’t seem so overwhelming.
Remember to take your time and do your research, and you’ll be making solid investments before you know it.
Be sure to check out the rest of our real estate articles for more tips on how to get your investments moving!
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