For the fifth consecutive year, real estate has been ranked as the most popular investment vehicle in the United States, according to a Gallup survey. As a result, many people are now considering real estate investments. While the profit potential is high, though, there are a few things aspiring real estate investors should know.
Define an Investment Strategy
Aspiring real estate investors should first define their investment strategy. In other words, what type of property do they intend to purchase, and how will they make money off it? House flipping is a popular investment strategy that involves buying and renovating distressed houses, after which they are sold for a higher price. It’s not uncommon for investors to double their investment when flipping houses. Alternatively, investors can buy rental properties like apartments and duplexes to manage.
Anyone can buy a property and call it an investment, but it takes a certain level of skill and knowledge to turn a profit on it. Thankfully, there’s a wealth of knowledge available for aspiring real estate investors. There are hundreds of real estate investing videos available on YouTube, for instance, all of which are free to watch. Some websites also offer learning courses and coaching on real estate investing.
Consider Suburban Properties
The high cost of urban properties makes it difficult for investors to turn a profit when buying and reselling them. However, this doesn’t mean that investors should choose rural properties. Suburbs throughout the United States are expanding as more and more people relocate to shorten their commute. Investors can take advantage of this trend by purchasing and reselling suburban properties.
Investing in real estate costs money, so aspiring investors should assess their finances. Even if an investor has little or no cash, he or she may be eligible for a loan from a bank or private lender.
Diversify Portfolio With Passive Investments
Creating a diverse portfolio of real estate investments is essential to lowering the risk of financial loss. In addition to buying properties in a variety of markets, investors can also diversify their portfolio using passive real estate investments. A real estate investment trust (REIT) is a passive investment that’s akin to a mutual fund for real estate properties. An REIT company collects money from investors, which it uses to buy and sell properties.