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Three Ways to Invest in Real Estate Property

By: Elite Legacy Education, January 12, 2017

Three Ways to Invest in Real Estate Property

Whether you already own a house or not, there are other reasons for buying into real estate. If you’re looking to real estate for an investment opportunity, you should understand that there are different approaches.

 

What are the different ways to invest in real estate beyond buying a house for yourself?

Let’s focus on three “do-it-yourself” approaches to real estate investing. These typically apply to residential properties that don’t require huge sums of money from an investor pool. Of course, with each option comes its own set of pros and cons. You may want to consider factors such as profit margins, required investment, the timing of cash flows and so on.

Here’s a list of three different ways to invest in real estate starting with the most liquid to the least liquid option:

  1. Wholesale a Property: Wholesaling a house refers to when you purchase a property and essentially sell it as is. You look for properties that require obvious maintenance, but leave the repairs to the new buyer you find. These are the types of deals people are referring to with online lessons teaching you how to flip a house with no money down. We will go into more details about this in our article, How to Successfully Wholesale a House.
  2. Flip a Property: Flipping a property is a popular investment option for home improvement companies and independent contractors. This is when you purchase a house and physically renovate the property to drive its value up. Once all of this is said and done, you look to sell it for a profit compared to the original purchase price plus any additional investments made through renovations. We will go into more details about this in our article, How to Successfully Flip a House.
  3. Rent a Property: Investing in a rental property is common among property management companies, as well as individual investors. This is when you purchase the property and rent it out as a whole, or by individual units (i.e., bedrooms). Renting provides monthly income, but you are tasked with making sure each unit is occupied by a tenant. We will go into more details about this in our article, How to Successfully Rent Out a House.

 

Which real estate investment option is the right choice for you?

Finding the best option for you depends on factors related to you personally as an investor. Particularly, your stage of experience as an investor is of concern. You should also consider the amount of available resources you have to invest in these projects.

Typically, investors start out with wholesaling because it requires less money down. Even though the profit margins aren’t as wide, it’s a good way to test the water before jumping in fully. Flipping and renting a home both require that you purchase the house outright, which of course requires much more capital investment. However, the risk return payoff typically results in a larger profit. Each strategy has very different timelines in terms of cash flow. Flipping a home will produce a profit once you sell it to a new owner – as will wholesaling a property. Renting, on the other, hand generates incremental cash flows that occur typically on a monthly basis from those tenants who are residing in your property.

So what’s our recommendation to you? Start with a wholesale deal or two to get a feel for real estate investment. This works whether you do or do not have cash. Learn more in our article about wholesaling a property.

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