Thinking of buying an investment property? Owning a home is a major milestone for many people. And while most people worry about the mortgage after buying their first house, some have found a way to turn their homes into a good investment by renting it out. Turning your home into an investment home rental is a great way to generate income and build wealth in the long run. Real estate investing for beginners might be as simple as playing Monopoly where you buy properties, generate rent, and with basic knowledge of the economy, investment and risk to avoid bankruptcy; but simple doesn’t mean easy.
Real estate investing has produced many wealthy investors, but if you’re not well-versed before diving in with your hard-earned money the consequences can result to a major disaster. With that in mind, here are a few things to consider before you start looking into investment home rentals.
The Pros and Cons of Real Estate Investing
Everyone needs a home, but is investing for you? Understanding the pros and cons of investing on your home will help you determine if it’s a good idea or not.
Pros of Real estate investing
- a good source of passive income or steady cash flow
- less risk and volatility as the stock market
- get good tax benefits like deductions from expenses or through depreciation
- long term returns as properties appreciate in value
Cons of Real estate investing
- requires cash to pay for a property manager or other property improvements
- potential returns aren’t as high as the stock market
- dealing with tenants can be a challenge
- poor liquidity unlike when you sell stock
Ways to Make Money when Investing in Real Estate
Knowing how you can make money through real estate investing is as important as weighing the pros and cons. Let’s briefly examine a few simple ways investors can make money on real estate.
1. Owning rental properties
Buying a house and renting it out is a great way to produce extra monthly cash flow. Owning rental properties have their share of pros and cons. You can have a regular income and tax deductible associated expenses, but managing tenants can be a challenging job. Depending on who you talk to for advise, rental properties can be very lucrative. You can always get a property management service to maintain your rental home.
2. Investing in Real Estate Investment Groups (REIGs)
A Real Estate Investment Group or REIG can be any entity with multiple partners that focuses the majority of its business on real estate. REIGs usually buy, renovate, invest in apartment buildings, rental homes, commercial buildings, or commercial units; and sell these properties to investors through the company, thereby joining the group while taking responsibility for the administration and maintenance of the property.
3. House flipping
House flipping is buying a property and holds onto it for a short time and then sells it (the flip part) in the hopes of making a profit. House flippers are for people with significant experience in renovation, marketing and real estate valuation. While some property flippers don’t do many renovations, they have an eye for properties that have the intrinsic value without making any significant changes.
4. REITs Investment
A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate properties. What REITs do is they pool the capital of numerous investors through investors who buy shares in real estate portfolios then individual investors earn dividends from these real estate investments without having to buy, manage, or finance any properties themselves.
Are you ready to buy your first investment home rental?
When it comes to finding a home and turning it into a rental investment, the key to figuring out which investment decision is best for you are determining if the payoff is worth the potential risks involved. No one is born an expert especially in real estate investing. By familiarizing yourself with different real estate investment strategies, and doing your homework on the pros and cons, you will get there in no time.
For your first investment home rental, consider partnering with an experienced realtor to help you with the steps on buying your first home as well as your legal obligation as a landlord.
About ApexPro Real Estate
ApexPro Real Estate Group is a full-service real estate brokerage specializing in single family and attached residential properties throughout Houston and the surrounding areas. We are a privately-held small business that brings together top agents, cutting-edge technology, and unparalleled service to help clients throughout Houston to buy and sell real estate — and enjoy themselves every step along the way. Our client reviews are exhibits our dedication to help our clients extends beyond the closing table and we would love to earn your business.