If paying for your home’s monthly mortgage is your only experience investing in property, you might have the desire to expand your real estate portfolio. Actually, there are many ways to make money through real estate, and not all of them need to take out a big bank loan or scary second mortgage.
The following are some of the easiest ways to invest in real estate, and get expert advice on how to maximize your profits.
Invest in Rental Properties
Actually, prime rental property can bring in a significant monthly income and appreciate in value over time. though, Alex Villacorta, executive vice president of analytics at HouseCanary, a data analytics real estate platform for investors, realtors, brokers, and lenders said, before taking the plunge, buy-and-hold investors should take into consideration a list of factors, which includes rental rates, a property’s asking price, the state of the housing market, state, and local taxes and appreciation potential.
Villacorta kept saying, “Most of these factors change from neighborhood to neighborhood and even from block to block, there are still pockets of opportunity in most markets where home prices stay relatively low and price growth is very strong, which is a perfect combination for buy-and-hold investors who are having the intention of increasing their wealth through rental investment.”
The Insider Tip
According to Villacorta, although areas that require high rents are initially appealing, when rental rates exceed 30% of the neighborhood’s median income, the investment property market might be headed for unsustainable heights.
He said, A higher proportion of income that is required for rents would be a reward and risk at the same time, based on the investing horizon. In the short term, rising rental rates designate that there is strong demand for seemingly limited inventory, which foretells higher revenues for the investor. However, in the long term, these low-supply markets are the main targets for larger multifamily construction or increased single-family home production.
Sep Niakan, owner and managing broker at HB Roswell Realty and founder of the condominium listing site CondoBlackBook.com, said, investing in a multifamily property from the get-go can be a great option.
He said, Dealing with multiple tenants in multiple properties is always tougher than managing both the property and multiple tenants on a single property. Besides, another way to simplify your rental investment is to buy a condominium, where you will have to spend considerably less time maintaining the property than an independent property.
Find a Flip
According to Bobby Montagne, CEO of Walnut Street Finance, a private real estate development company that provides commercial loans in and around Washington, D.C, discovering, renovating, and reselling undervalued property for a hefty profit appears to be pretty easy on reality TV shows, however, you should be well-prepared to make a considerable investment in both cash and sweat equity.
He kept saying, If you watch HGTV, it is more than likely that you think that investing in real estate is an easy path to be wealthy. However, in real life, successful property flippers take time, money, local real estate knowledge, and renovation expertise. It takes time to find a property you can buy at a good deal, supervise the upgrades and renovations, and then resell at a profit.
The Insider Tip
Montagne also said that those who want to make a big fortune on flips should take into consideration all their costs before taking the plunge. Regardless of how easy it seems, flipping houses is not really an easy and quick way to make money.
He said, usually, flipping costs consist of a down payment of around 20% of the property’s total purchase price, payments to contractors for renovations, and sales costs such as real estate transfer taxes and the commission of the real estate agent.
Look Into Private Loan Funds
Typically, private loan funds typically work with multiple home flippers and support the investment of home renovations and resales. Montagne said, fund administrators also evaluate local market conditions along with the expertise of each renovator and plans for increasing a property’s value.
He also said, Investors who don’t have the time or will to supervise renovations, or the necessary knowledge about local real estate markets, home design, construction, and marketing can consult a private lender in order to invest in real estate flips.
The Insider Tip
Montagne said, investors should educate themselves when it comes to private loan funds, even though they will not need to use a hammer or comb local listings to have some home staging ideas.
He also said, before investing, consider studying the backgrounds of those who are running private loan funds, as well as looking for a lender with construction experience, local market knowledge, and a record of accomplishment of successful flips in both up and down real estate cycles.
Crowdfunding
Usually, crowdfunding collect money from multiple investors mostly through online platforms in order to fund a project or real estate development.
According to Ralph DiBugnara, the president of the online real estate information guide Home Qualified and vice president of retail sales at the mortgage-lending firm Residential Home Funding Corp, This strategy provides an exceptional chance for first-time investors. Crowdfunding makes investing approachable and affordable by giving investors the opportunity to buy shares of a property instead of an entire residence.
The Insider Tip
Craig Cecilio, CEO and founder of the crowdfunding company DiversyFund said, there are many platforms out there and not all of them work in the same way.
He kept saying, the best tip I can provide is to make sure you understand whom you are investing your money with and their investment structure because many real estate crowdfunding companies lack the experience and understanding of their markets, and their business platforms are based on fees taken from the investor. In addition, be sure to compare companies head-to-head depending on fees, returns, transparency, and the variety of investments offered along with the leadership experience.