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What Makes for A Good Investment in Real Estate?

by | Jul 8, 2019

Breaking into the real estate market can be overwhelming when there are a variety of investment options. This might leave you wondering what makes for a good investment in real estate. There are several ways to begin your real estate investment career that are relatively low risk. 

Rental Properties

Rental properties are a common way to break into real estate investment, and they are the most consistently profitable. 

Rental properties are a good investment because they have the potential to appreciate value over time. Assuming your property has a steady flow of tenants, you’ll have the opportunity to increase revenue as your property appreciates. 

In order for a rental property to be a profitable real estate investment, the combined mortgage, insurance, and property tax payments should cost less than the rent you could reasonably charge. 

Fixer-Upper Homes or “Real Estate Trading”

Now that property values are increasing once again, purchasing and “flipping” houses can make a good real estate investment. This method is also called “real estate trading,” because the owner only holds the property for a short time before reselling

This method of real estate investment requires that you purchase a property in the market that needs a bit of work to be marketable. Once you own the property, you can develop it and then resell it for more than you originally purchased.

As with other properties, fixer-upper houses are only a good real estate investment if the cost of the house plus the total cost of any renovations you make is less than the selling price.

Fixing and reselling properties can be risky because your property may not quickly or sell for more money than you invested. But, with special care and attention, flipping houses can be a profitable real estate investment. 

Make A Good Investment with Real Estate Investment Trusts (REIT)

Real Estate Investment Trusts are a good way to invest in real estate without having to deal with physical properties within the market. 

Just as you can invest in corporate stock for a multitude of companies, you can invest in the real estate stock. Investment trusts are established to invest in mortgages, bonds, and real estate stocks. 

In other words, you give money to the REIT, who then takes your money and uses it to invest in properties. So, you reap the benefits without any of the pesky hands-on work. 

Real Estate Investment Groups

Though they may sound similar, real estate investment trusts and groups operate quite differently. That being said, the end result for the real estate investor is much the same. 

Real estate investment groups, like trusts, allow you to own property without the hassle of maintaining property. Real estate investment groups purchase or build properties and then allow investors to buy them. When investors purchase properties from investment groups, they are then considered members of that investment group.

These properties are then managed by the investment group but owned by the real estate investor. The group advertises vacancies, communicates with tenants, and deals with maintenance concerns, on the investor’s behalf. 

In order to make it worth their while, investment groups take a percentage of the monthly revenue generated by rent. 

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