949-392-1999
There are many different types of real estate investments. Which way is best is for you, according to your particular needs. Here are 10 ways to consider, with their advantages and disadvantages.
1. Rental Houses
- Advantages: One of the easier ways to get started, and good long term returns on your investment.
- Disadvantages: Being a landlord isn’t much fun, and you typically wait a long time for the big pay-off.
2. Apartment Buildings
- Advantages: Economies of scale, significantly higher cash flow and fast way to wealth.
- Disadvantages: Requires more money to get started, higher risk and intensive management required.
3. Rent-to-Own or Lease-Option Houses
Advantages: When you buy, then sell on a rent-to-own arrangement, you get big cash deposit upfront, higher rent, and the buyer is usually responsible for maintenance. Disadvantages: The bookkeeping is tricky, and most tenants don’t complete the purchase (this can be an advantage too, but it does mean more work for you).
4. Fix ‘n Flips
- Advantages: A quick return on your investment, and it can be more creative work.
- Disadvantages: Higher risk (many unpredictables) and you can get taxed heavily on the gain.
5. Vacation and Short-Term Rentals(AirBnb)
- Advantages: You can get started without buying a property, high returns and can be easily delegated.
- Disadvantages: Requires tight management, can have bad guests.
6. Buy Land, Split it and Sell it
- Advantages: It is simpler than most real estate investments, with the possibility of great profits.
- Disadvantages: It can take a long time, and you have expenses, but no cash flow while you wait.
7. Boarding Houses
- Advantages: You can get a lot more cash flow renting a house by the room, especially in a college town.
- Disadvantages: You can get a lot more headaches renting a house by the room, especially in a college town.
8. Commercial Real Estate
- Advantages: Long term triple-net leases mean little management and high returns.
- Disadvantages: Tough market to break into, requires higher cash investment and you can lose income on vacant storefronts for a year at a time.
9. House Hacking
- Advantages: Grow a portfolio quickly, can purchase with 3.5% down FHA loans, can improve property while you live there and your tenants pay your mortgage.
- Disadvantages: You must live there a year, be an onsite landlord, have no privacy, and to scale, you have to move a lot.
10. Speculation
- Advantages: Buying in the path of progress and holding until values rise can yield large profits, especially if you buy low to start.
- Disadvantages: Prices aren’t that predictable, you have expenses with no income while you’re waiting, and transaction costs can eat much of the profits.
As you can see, there are many different ways to invest in real estate – and not all strategies are mentioned here. Real estate has long been a lucrative investment with both advantages and disadvantages. You just need to do your homework. Carefully research the various types of investments and find one that works for you. Then, just get started – the hardest part for many investors. However, once you take that first step, you’ll understand why real estate is considered one of the best investments out there.
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a blog, newsletter and podcast for seniors and retirees that teaches the art of real estate investing. His personal real estate investing goal, which will be chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in the next 6 years. Prior to that, Bill and his family lived in Haiti as missionaries serving orphaned, abandoned and at risk children for Child Hope International.
