Choosing to make a real estate investment can be a good alternative for people looking to earn a steady source of income without having to take on another full-time job. However, it requires due diligence to ensure that the investor knows what to expect in terms of financial output, time commitment, and potential profit.
Below are four popular ways to consider investing in real estate.
Renting a single home or multiple units of an apartment complex is often the first real estate investment that people make. It is also the most hands-on of the opportunities and can require property owners to be available at all hours to respond to emergencies if they choose not to hire staff. After collecting rent checks, paying the mortgage on the dwelling, and paying expenses, the amount left over is straight profit.
Purchasing a house, fixing it up, and then reselling it for a profit is a concept known as real estate trading or flipping. It takes in-depth knowledge of the real estate market and acknowledgement of the risk that the house might not sell or that the owner may not earn any profit on the sale.
Joining a Real Estate Investment Group
People who desire a real estate investment but don’t want the responsibility of managing the property can consider becoming part of a real estate investment group instead. This type of investment in real estate is similar to investing in mutual funds. The group purchases properties and then gives members the right to buy one or more of them. Investment group members earn money when renting or selling the property to others.
Real Estate Investment Trust
Commonly known as REIT, this involves purchasing stocks from companies that primarily invest in real estate. Corporations form REITs by using money from investors to purchase a property for passive income potential. Federal law requires REITs to pay at least 90 percent of taxable profits as dividends to keep retain the status.
Please contact us at Purevue Capital to learn more about these and other real estate investment options.