2. Buy And Hold Real Estate For Rent
As a property investor, you have several options for investing in properties, including buy and hold real estate. When you buy and hold, you rent the property out to tenants. There are several ways you can take advantage of buy and hold real estate, including the following:
Long-Term Residential Investment Properties
Long-term residential rental properties are homes you own and rent to tenants for long-term occupancy. These investment properties may be single-family homes or multi-family complexes. Depending on how you choose to outline the lease agreement, you may have month-to-month leases or annual leases that are up for renewal each year. When the lease agreement expires or your tenants decide to leave the property, you may be in charge of finding new renters.
Rental properties are a great way to build wealth because they provide monthly cash flow. The rent you charge might cover the mortgage payment, property taxes and homeowners insurance. Keep in mind that you’ll likely have to front the money for home maintenance and repairs. The difference between the gross rent you charge and your housing costs equals your net proceeds on a rental property.
Many investments, like stocks or bonds, don’t pay a monthly cash flow, so having long-term residential rental properties is a great way to generate a steady income stream.
Short-Term Vacation Rental Properties
If you’d rather not deal with the hassle of having tenants year-round, you can invest in short-term vacation rental properties. The premise is similar to buying and owning long-term rentals – you own a property or properties, but instead of renting on a long-term lease, you rent to travelers for shorter periods of time. Some investors use platforms like Airbnb or VRBO to attract potential occupants to their short-term rentals.
When you buy a second home or vacation home, you can even use it for your own vacationing pleasure. Then, you can rent it out when you’re not using it to earn some cash flow and cover the cost of owning the home.
Like a long-term rental property, you’ll make money when tenants rent the house. You can use the cash to cover the property’s expenses while enjoying the property’s appreciation and your equity, maximizing your rental income.
Land Rentals
If you own land but don’t have a property on it yet, you can still earn cash flow by renting out the raw land. You won’t make as much cash as you would if there were a property on it, but you could charge others to use the land for things like storage or to collect wood.
You might consider using the cash flow toward building a property on the land. Keep in mind that land doesn’t appreciate in value like residential properties do, so building a house could be an investment that’s worth it in the long run.
Commercial Spaces For Rent
Investing in commercial real estate is another way to earn a solid cash flow. When you own the physical property, you can rent it out to businesses. Commercial properties can include office buildings, retail spaces, small businesses and industrial properties.
If you’re acting as the landlord or property manager, you’ll likely be in charge of maintaining the building and making any necessary repairs – though you won’t have to worry about the businesses themselves.
The tenants pay you rent, just like residential tenants would, which you then use to cover the mortgage and any upkeep expenses.
5. Invest In Real Estate
If investing in physical real estate doesn’t work for you, there are other types of real estate investments you may be interested in pursuing. Some of the most common investment opportunities include the following:
Exchange-Traded Funds (ETFs) And Mutual Funds
If you’re looking for ways to diversify your investment portfolio, you might consider investing in real estate exchange-traded funds (ETFs) and mutual funds. Typically, a fund manager or investment advisor manages both investments. ETFs are passively managed and mutual funds are actively managed.
Real estate ETFs have lower costs than mutual funds, and you can trade them like stocks any time of day while the market is open. Mutual funds only trade once a day after the market closes.
Both of these investment opportunities can help you earn some extra income without having to put in the work of a landlord or property manager. And, because these investments are managed by professionals, you don’t have to worry about researching where your money should go.
Crowdfunding
Real estate crowdfunding is another way to diversify your investments and assets. Crowdfunding allows you to pool your money with other investors online to invest in either a property’s equity or debt. Either way, you earn a prorated amount of the rent as cash flow based on your investment.
Real estate crowdfunding is a great way to get your hand in the real estate investment pot without carrying the responsibility of owning and maintaining a property yourself.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is a publicly traded company that owns, operates or finances properties that produce income in a certain area of the real estate market, like commercial properties. You pool your money with other investors.
While publicly traded REITs can allow individuals to invest in commercial real estate, you may also have the opportunity to work with residential REITs and healthcare REITs.
Because REITs are publicly traded, you can buy and sell shares on the market, which means your money is more liquid, allowing you more investing opportunities.
Real Estate Investment Groups (REIGs)
An REIG, or real estate investment group, is an organization of private investors who work together for a similar goal: investing in real estate. As a group, you may decide to invest in long-term residential properties, short-term vacation rentals or fix-and-flip properties.
When you work with a group of like-minded individuals, you may have a greater chance of securing better deals or making larger investments because you pool your money together.
Real Estate Wholesaling
Real estate wholesaling is an option for investors who know how to find real estate deals and have a target market they can sell to. Wholesalers usually turn properties around within 30 days. You buy properties at less than market value and then sell them for more money.
