It’s important to diversify your financial portfolio. You cannot rely on one source of income, after all. As the adage goes, it’s never wise to place all of your eggs in one basket. If that basket collapses, you lose everything. Here investing in real estate comes in. It will supplement your income from a job or business.
When it comes to real estate investment, you have a variety of earning options. If you have enough capital, you can exhaust as many of these opportunities. Or you can zero in on one you feel is most viable based on your situation. Here are your choices.
House flipping
House flipping is both an art and science. It’s art because you need the imagination to envision a fixer-upper’s potential. It’s a science because you need to base decisions on tried and tested principles.
With house flipping, the bulk of your work rests on finding a listed property you think you can work your magic on. That’s with the help of professional contractors such as construction service providers and commercial landscaping experts, among others. You can also DIY the entire project, but it might take you a long time to complete it. That’s not recommended to those looking to make a quick profit.
One key principle every house flipper should know is that location is vital. No matter how perfectly you improve a house, if it’s in a neighborhood without any potential, chances are fewer people will be interested to purchase it.
Contract flipping
Contract flipping is pretty much like house flipping in the way that you act as a sort of intermediary between the original seller and the person who’ll eventually end up with the property. The only difference is with contract flipping you do not do any renovation on the property you purchase.
Your goal is simply to sell it ASAP and with a considerable markup. Distressed sellers are contract flippers’ source of business. These sellers need to sell for a more or less pressing reason, the most common being they need cash. That’s why their property comes with a relatively cheaper price tag. A contract flipper comes to the rescue, ideally with a buyer ready.
Rent/Lease out
Passive incomes are always a tempting prospect. One way to earn a passive income from real estate is to manage rental properties. You can buy a duplex apartment, for example, and rent them out to young families.
Keep in mind, though, that you cannot be altogether passive when renting out properties. You still need to manage your assets. And, more often than not, and depending on the contract you sign with your renter/leaser, you’ll be responsible for handling your properties’ repair needs.
Airbnb
This is most suited to people on the go. If you have contracted the wanderlust disease and you’re typically absent from your main address, you might as well make money from your idle property. List it on Airbnb and charge guests by the night.
Just make sure that before your property goes live on Airbnb, you’ve made the necessary preparations. No one will be interested in staying in a poorly maintained house while on vacation. So get yourself a custodian who’ll look after your Airbnb listing while you’re away. And be careful when accepting guests too. You do not want to end up hosting a guest who’s a borderline psychopath in town for some evil plan.
Hold on to sell later
This is probably the most old-school way to profit from real estate. You buy a property knowing that it will most likely appreciate over time. If you are not in a hurry to make money, this could be your safest bet. If no crisis hit the industry like what happened in the U.S. housing market more than a decade ago, you can rest easy. Homes appreciate at 3.5 to 3.8 percent per annum. In a decade, the property you bought will have increased in value by at least 30 percent.
Remember that you cannot go into real estate investment blindly. It pays to research the industry before you join its high-stakes game. It’s also in your best interest to partner with a reliable estate agent. You cannot just wing it on your own. Even if you feel like you’ve already figured out how the whole industry works, you need the guidance of an expert.
Lastly, only go for calculated risks. While investments require you to gamble, gambling with as many favors on your side is still the smartest way to go. Now, have a rewarding adventure.
