If there is one investment that has withstood the test of time, it is real estate. In fact, millionaires agree that rental properties are still the best investment today.
However, you need to know what you’re doing if you want to make money. Luckily, we can make that simple for you. Let’s talk about some great ways to get started investing in rental property.
1. Invest In an REIT
Real estate investment trusts (REIT) are publicly-traded companies that invest in real estate. By definition, they have to pay out at least 90% of their profits to shareholders.
This is an excellent way to begin investing in real estate if you don’t have the finances to make a downpayment on your own property yet. REITs pay dividends to shareholders of anywhere between 0.75% and 8% annually, so if you reinvest your dividends and earn compound interest over time, then you will eventually have enough to make a downpayment.
Alternatively, you could simply continue to reinvest your dividends and use your REIT portfolio as a means of earning passive income.
Downsides of REIT
You can’t control the rent, you can’t control who lives there, and you can’t control the market. When investing in REITs, you relinquish a lot of control over your investment.
Also, the returns aren’t usually quite as high. Dividends are usually around 2%, which you could be earning every month or two with your own rental property.
2. Directly Investing in Rental Property
There are few investments quite like purchasing a rental property. For one, you can’t get into other investments for such a low barrier. The barrier of entry to purchase your first rental property is as little as 15%.
Once you have it, it’s yours. You have a measure of control over it unlike what you would have with an REIT, stocks, or most other investments. You set the rent prices, you choose who lives there, and you choose when to sell.
Well, because it is such a secure investment, it’s very popular for those looking to earn extra income. That’s why independent landlords own over 22.7 million rental units across the United States.
You can even buy rental properties that already have tenants in them. When you purchase a rental property that is already operational, it is called a turnkey investment, which requires little more than signing some paperwork!
From there, you can simply take in the rental checks every month and simply maintain your property as time passes.
Downsides of Turnkey Rental Properties
The main downside of this investment method is the price tag. Although, as we mentioned, you only need about 15% to get started, and you can change the rent prices as necessary if the mortgage payments are too high.
Keep in mind, you will save money upfront by not having to make any major repairs or anything else at the beginning, so the expenses often balance out.
3. Flipping Houses
Flipping houses is a great way to earn a nice chunk of change.
Let’s say you buy a property in a nice neighborhood for $100,000 that needs new wiring, drywall, and plumbing. If you spend $50,000 on those repairs and then sell the house for $250,000, then you made $100,000 off of your investment, which is a 66% return.
Much like with rental properties, you can grow these investments like bacteria. If you make $100,000 on your first investment property, you’ll be able to afford a second.
Once the flipping process is done, your options are open. You can sell the house, rent it out, or rent it out and sell it later! It’s yours to do with as you please.
Downsides of Flipping Houses
The main downside of flipping houses is that you will have a large upfront bill. However, in the scenario mentioned before, you would only need around $70 to get started. $20,000 for a down payment and $50,000 for repairs.
Also, if you aren’t handy, you will have to cut into your returns by hiring outside help for your projects. If you are handy, you could save a fortune!
4. Follow the BRRRR Method
Real estate investors will tell you that the BRRRR method is the king of rental property investments. This tried and true method is the best way to maximize your earnings potential from an investment property. The acronym stands for buy, rehab, rent, refinance, repeat.
First, you buy. You need to do your research and find the right property in the right neighborhood, like on URB Chicago, as you don’t want any outside forces to harm your investment.
Next, you want to rehabilitate your property. It may not require a total “flip” but it does need to be livable, comfortable, and appealing to maximize rent prices.
Then, you should rent it out to the right tenants. Always use tenant screening services as one bad tenant can destroy your investment. From there, you will refinance your loan with your lender when you can prove how much more valuable your property is, and then opt for a cash advance.
Finally, you will use that cash advance to buy another property, repeating the process. If you want to get the most out of your real estate investment strategy, then this is the way to go.
Grow Your Business Today!
Now that you know how to invest in real estate, you can get started investing in a rental property today. Choose which method is right for you, focus on growth, and secure your financial future! Stay up to date with our latest real estate news and feel free to contact us with any questions!
