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Investing a large chunk of your money in any venture can be a cause of anxiety. While some forms of investment are naturally less risky than others, there is always the potential that you could lose money, resulting in many sleepless nights. Although investing in real estate might sound great on paper, there are several factors to consider before taking the leap.
Despite real estate being a reasonably sound investment with the potential to make short-term or long-term gains, the benefits don’t outweigh the risks for everyone. To decide whether real estate investing is right for you, we are going to show you the various ways you can get your foot on the property ladder. There are different ways to invest in real estate, and each comes with its pros and cons. Keep reading to find out which investment might work best for you.
Flipping a House
Anyone who watches HGTV knows that flipping a house is when you buy a property intending to sell it on again quickly after a few strategic improvements are made. There is the potential for large profits, but these profits are in no way guaranteed. Plenty of people lose money during this process, especially when they don’t take all expenses into consideration.
Renovations can quickly go over budget and schedule, and in the meantime, you might have all of your finances locked up in the deal. The best people to invest in house flipping are those that can do much of the work themselves. This includes but is far from limited to gardening, painting, demolition and hauling, real estate listing, and decorating. Don’t forget that when you are working for yourself on a house flipping deal, you won’t necessarily have the potential to make another income.
Rental Property
When interest rates are low, it is a fantastic time to consider investing in a rental property. If you qualify for a mortgage, you’ll make money in two ways. First, you have the benefit of your tenant paying down the mortgage, and then secondly, you’ll gain additional equity as your property will hopefully appreciate in value. Depending on how you work your figures, you might even be able to make money every month in the process.
Rental properties still come with their own fair share of headaches. Difficult tenants can make wanting to continue investing a real challenge. Using an online rental application will make your job significantly easier when looking for the best people to occupy your property. You will also want to consider the expense of maintenance, emergency repairs, and insurance. A slush fund in case your property needs to be vacant for a few months is also advisable.
Owning Your Home
While there is no doubt that owning your home is an investment, it is also your most significant liability. This is because most people are unlikely to be making an income from their home. However, you won’t need to pay rent, and your home will likely appreciate in value.
There is the potential to earn an income from your primary residence. You can add a self-contained rental suite, or you could put your house up for short-term rental with the likes of AirBnB. Home-based businesses may also be possible in your area and can assist with your income tax returns.
Investing in the real estate market isn’t all about having the most houses or hotels like in Monopoly and it isn’t as volatile as cryptocurrency. There are numerous ways that you can potentially earn a great return on your money, but you need to be strategic and work out what is best for your current situation and long-term goals.
