Some of the wealthiest people in the world have become so by investing in residential property. If not wealthy, then comfortable enough to fund a comfortable retirement. There are several approaches a person can take when investing in residential real estate.
Flip It
If you are willing to put in sweat equity and can find a house on the market at a bargain price or considerably below market price, flipping houses may be a good investment strategy for you. Even if you need to hire a contractor, a home purchased at a low price and sold at market value can make a substantial profit.
Flipping a home requires that either you or a contractor make all necessary repairs and upgrades to make the home sellable. You will want this done quickly because once the clock runs out on your short-term construction loan you will need to convert it to another type of loan or extend it, that is unless you paid cash for the property. Getting the job done quickly can give you a fast way to grow a residential real estate investment.
If you know your market and home values of property in the area, the knowledge to repair a home or see that it is done, and a desire to make a tidy profit on your investment, residential real estate may be for you.
Residential Rentals
For long-term, personal wealth, ownership of one, two or ten rental properties can create monthly cash flow that can affect your life today and long into the future. As a retirement strategy, rental properties can be acquired that will either fund your retirement or give you substantial assets that can be sold when you retire to buy and pay for your dream home.
Dealing with rental property is not for the faint of heart. Your personal budget can be affected by a missed rental payment if you have not planned for such eventualities. Managing the process of finding renters, maintaining the property, and planning the budget for the property, as if it were any other small business takes time and dedication.
Getting a call at midnight because a renter has no hot water may be more than you want to deal with and more conventional methods of investment may be more to your taste. That is unless; you are making enough cash flow to hire the services of a property manager. However, if you have the funds to invest in rental real estate and the will to deal with its requirements, then you can begin making a great contribution to your personal assets.
Know what you are buying
No matter what investment real estate you decide to purchase a home inspection will be worth every dollar spent. Costs of unseen issues, such as a leaking basement or roof; furnaces and AC units that are nearly worn out; structural, electrical or plumbing issues will be discovered through an inspection.
All can be costly to repair and may blow your budget out of the water and diminishing your investment. There are many short-term loans available to investors with excellent credit and the means to repay the loan. If you decide on this type of investment, proceed with caution because a bargain is not such a good deal, if it costs you more than it is worth.
Is real estate investment for you?
Knowing what you are getting into and making plans before ever finding a property can help you make a wise investment. If you do not know the area, a Realtor can familiarize you with the neighborhoods in your city and let you know when properties for sale are available.
After considering the pros and cons of residential real estate as an investment, you may find that playing it safe with your 401k is the best option for you. However, if you are willing to do the due diligence, and make a plan for financial freedom in the future, residential real estate investment can pave the way to that realization.