When I think about real estate, I think about the home I live in, the home that I purchased for my family, and hopefully a home that it will appreciate in value. Buying a home to live in is an investment. Real estate is one of those assets that typically appreciates in the long run and when you do sell, hopefully you will see a gain. Real estate investing is what I consider a long term investment.
When I hear real estate investing, I think about buying properties and renting them out. I think about buying a property, fixing it, and then selling it for a gain. If you ever watched the HGTV Flip or Flop show, you’ll know what I mean. I think about Live In Flip where you buy a house, move in, renovate, sell the house, then buy another one and repeat these steps. Lastly, I think about Real Estate Investment Trusts (REITs) where this allows you to invest some of your money and you become a part investor in a bigger real estate investment. There are other real estate investing options including commercial real estate. I am going to highlight just these four.
Buy Property To Rent
I accidentally came into the rental property investing unexpectedly managing 2 homes. Before I got married to my wife, she owned a townhome in Atlanta which we did not want to sell. We thought it would be a good investment and rented it out. A few years later the management of the house along with difficulty of finding a renter, we decided to put the house on the market. We tried selling after the 2008 market crash but just could not find a buyer even though we were selling much lower than what we purchased it for. Unable to sell, we decided to rent it out and thankfully, found a very good renter for 3 years. The house eventually required major maintenance repairs such as replacing 2 HVAC units and deck repair which comes with the territory of maintaining a rental property. After our renters moved out, the housing market went back up and we decided to put the house on the market again. Knowing that the market came back up, we were able to sell at a gain. It’s very important to keep up with the economy and the housing market because it will determine timely decisions you make with your housing investments.
My second property is a high rise condo in Atlanta. Years ago while visiting Atlanta, we came across a brand new high rise condo being built. A simple curiosity turned into a second property investment as we had plans to move to Atlanta at some point. As they say, life happens, our plans changed and we did not move back. What do we do? Since we had some experience under our belts with our first property we decided to rent it out. A few things were learned from this experience
- Location is important – We were fortunate to buy a condo in a nice busy area of Atlanta so finding renters was not difficult. The hardest part is finding the right renter.
- Managing a rental property from a different state is difficult but not impossible. Having people in the area we knew really helped us out.
- As long as your rental income covers your mortgage, someone else is paying it off.
- Finding the right long term renter is important. We had some interesting tenants along the way.
- Rental property expenses can be deducted from rental income on your tax return which help reduces what you owe to the government.
- Once you get to a point where your rent is more than your monthly mortgage payment, you start to have a positive passive income flow. This is a step towards financial independence.
Buy, Fix, and Sell
Just as the title says, buy a property, fix it up, and then sell it. The key to this is to get a low cost property, fixer upper, and sell it as soon as possible. You do not want to have an additional mortgage payment. To make the most of this financially, it’s best to have contacts in construction and repairs, experience with Do It Yourself (DIY) projects, and having a real estate license so you can list the home yourself. These can all help minimize your expenses so you can sell with a decent profit.
Live In Flip
This is where you buy a home, live in it and while you’re living in it, renovate, and then sell. You find another home to live in and repeat the same steps. It’s similar to a house flip except you’re not up against time. You’re living in the home that you’re renovating so you can go at your own pace.
I recently looked into REITs trying to determine if it was worth investing. REITs is good if you don’t have the capital to initially purchase a property. You can invest however much you want and watch it like the stock market. It goes up and down. So if you invest $100 in a REIT, that means you have part ownership and you will receive dividend payouts based on the amount you’re invested.
Real estate investing, like any other investment, has risks. There’s a difference between buying a couple shares of Google or Amazon versus buying a property. It’s easy to sell your stocks, but it’s not that easy to get rid of property when want to throw in the towel. I personally like buying property to rent because I invest for the long term benefits such as establishing passive income. Will I buy more property? I think I would but it takes a lot of initial capital to get started to make it worth it. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.
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