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How To Invest in Real Estate

by | Jan 3, 2019

Real estate investing is often a wide open area. It is definitely not like stocks or bonds, real estate investing is quite different. Real estate investing is an unfamiliar investment opportunities are very far and in between. It can be a lucrative and reliable way to generate income and returns. The affects of flipping or selling a home can be very rewarding.

To start from the beginning, what exactly is real estate investing in the world of business? Well in this article we will explore what exactly real estate investing is and the ways that you can invest.

 

What is Real Estate Investing?

Real estate investing is the purchase, ownership, lease, or sale of land and any assets on the land for the purpose of receiving currency. Real estate generally breaks down into three categories: residential, commercial, and industrial.

 

Ways to Invest in Real Estate

There are many ways to invest in real estate with any amount of money, time commitment, and investment. Real estate investment options break down into 2 major categories: active and passive investments. Here are a few ways to invest in real estate with the most popular way of real estate investing including, House-Flipping.

 

Active Real Estate Investing (Doing it Yourself)

This type of real estate investing requires a lot of personal real estate knowledge and hands-on management or delegation of responsibilities. Active investors can work as real estate investors part-time or full-time, depending on the situation and number of their investment properties that they are looking to sell. They usually invest in properties with only 1 or more owners, so they involve quite a bit of responsibility in making sure the success of a property. Due to this, active real estate investors need real estate and financial negotiation skills to improve their cap rate and make a greater return on investment.

 

House Flipping

The most active and popular way to invest in real estate is with house flipping. With house flipping, an investor purchases a home, makes changes and renovations to improve its value on the market, and then sells it for a better and higher price. House-flipping is generally short-term, because the longer the investor owns the home without leasing it to tenants, the more their expenses add up. This eats away at returns when they sell it. Investors can repair or renovate the home to increase its sale price or sell when its value in the housing market increases.

While house-flipping is exhilerating, it also entails great financial and real estate knowledge to make sure that you can make over the home within time and budget constraints so that you can make a better profit off of each property. You need enough cash for a down payment and/or good enough credit to secure a home loan in order to buy a property before another flipper.

Another house flipping option is wholesaling. Wholesaling is when an investor signs a contract to buy a property that may be underpriced and then sells it quickly to another investor at a higher price for more profit. Most often, wholesalers seek out properties in need of renovations and sell them to house-flippers who are willing to perform the renovations.

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