In the 1965 animated television special A Charlie Brown Christmas, a young Lucy laments that she never gets what she really wants for Christmas. What is that? Real estate. While we can laugh at Lucy’s comments because they come from a child, the fact remains that real estate has been a very good investment for decades.
Are you thinking about getting into the real estate game? Great. Before you do, there is a lot to think about. Making money in real estate is not as easy as just buying a property and then either selling or renting.
Below is a list of considerations, complements of Actium Partners in Salt Lake City, Utah. Actium Partners has helped many investors with strategic hard money lending for real estate over the years. They know a thing or two about making money in real estate.
Residential or Commercial
The very first consideration is whether to focus on residential or commercial real estate. It is nearly impossible to do both correctly, so it’s best to decide on one or the other. Residential real estate involves single-family homes, duplexes, and apartment buildings. Commercial real estate involves warehouses, office buildings, and the like.
Both have their pros and cons. As a general rule, commercial real estate investing is a more costly venture thanks to higher property values. But with increased cost comes increased profit potential.
Sell or Rent
Next up is the question of whether you are going to flip properties or rent them. Flipping residential properties was the hottest thing in the late 1990s and early 2000s thanks to intense media coverage. Everyone and his brother seemingly had a formula for making money in flipping.
The other side of that coin is renting. Where flipping is a short-term strategy, renting is long-term. You build wealth by holding onto properties and renting them out even as their values continue to increase. The theory is that you earn money from rent and also make a tidy profit when you eventually do sell.
Financing is one of the things people do not think through very carefully when they first get involved in real estate investing. Bank loans are where your average new investor starts. It turns out that bank loans may not be the best option. They certainly aren’t the only option.
Hard money lending is a form of financing experienced real estate investors lean on frequently. Then there is peer-to-peer lending, crowd funding, and tapping into your own cash assets and credit. Note that there is no single financing solution that works for every transaction. Each transaction has to be evaluated individually.
Finally, investing in real estate successfully requires determining your goals long before you get started. For example, let us say you are looking to build a means of sustainable income that will eventually fund your retirement. You could employ a flipping strategy that results in you taking your profits and investing them elsewhere. You could employ a rental strategy that uses your properties to generate the monthly income you’re after.
Whatever your goals, they dictate how you should proceed as a real estate investor. You will not be able to proceed in the right direction if you don’t know what that direction is. So whatever you do, don’t just start putting money into real estate haphazardly. Know where you’re going and how you intend to get there.
Real estate continues to be a solid investment option. It is worth looking at if you’re interested in a new investment opportunity and you have what it takes to make money in the real estate market.