WHETHER YOU INVEST IN THE CASH FLOW OR THE LONG-TERM RETURNS, REAL ESTATE OFFERS GREAT DIVERSIFICATION
If you have the capital, real estate investments are a great way to grow your earnings. Whether you invest in the cash flow or the long-term returns, real estate offers great diversification. It’s a great way to diversify your portfolio if it’s in stocks, bonds, or any other market.
There are a few ways you can invest in real estate, making it a great option for those with a little or a lot of capital. There are real estate opportunities for people at all stages.
This is my favorite. You can be an investor without truly owning an investment property. Rather than buying a single-family property or even a single condo to rent out, you buy a multi-unit property (up to 4 units).
You live in one unit as your primary residence and you rent the remaining units to tenants. You get the monthly cash flow after paying your mortgage (if applicable) plus you earn the equity in the home as you pay down the mortgage and/or it appreciates.
When you sell the home, you keep the profits.
BUY AND HOLD INVESTMENTS
If you have the capital to buy a single-family home that you can buy and hold, it’s a great long-term investment. If you rent it out, you’ll earn the monthly cash flow, plus the home’s appreciation. Homes appreciate an average of 3.8% per year.
If you hold on to the home for 10 years, you’ll earn a decent profit, plus the cash flow you earned while renting the property to tenants.
If you have the capital, you can help homebuyers that don’t have access to standard loans. Millions of home buyers can’t get traditional financing whether due to poor credit, irregular income, or recent negative credit events, such as foreclosure or bankruptcy. Banks traditionally turn them down.
If you have the capital, you can be the ‘lender’ for buyers. You wouldn’t provide 30-year terms like banks, but rather provide short-term financing that helps bridge the gap so homebuyers can get the home they want despite their irregular circumstances. By the end of the term (2 – 5 years) the buyer gets his or her own financing and/or sells the home.
If acting as a landlord doesn’t appeal to you, buying and
flipping houses is another great tool. Rather than buying to rent the home out, you’re looking for attractively priced homes (below market value) that you can fix up and sell for a profit.
As with any investments, there’s a risk in real estate. As we all saw in the housing crisis of 2008, house prices can fall in the blink of an eye and take years to come back. But, that’s a risk you take with any investment.