When you begin investing in real estate it is important to have goals. The market can be uncertain but real estate is solid. There are different risk factors depending on where you place your investment. Many individuals have gotten out of the stock market and are looking for a passive stream of income to eventually replace the income they currently have.
Multifamily leasing technology makes a difference in the purchasing of homes. Commercial multifamily homes, small multifamily homes and single family homes offer a nice monthly cash flow. You investment will grow each year as the tenants pay your debt with their rent. Over time you will be able to increase the rent and improve the property.
Becoming a co-investor with a large stable firm allows you to share in the profits without having to do any of the heavy lifting. The company will both acquire and manage assets using your investment. You will have the advantages of direct ownership yet the ability to remain passive. Another option is to place your investment with a real estate sponsor. You can fractionally own a share of a property that is much larger without having to manage the property.
An investment in raw land has a higher potential for risk. The best option here is land with timber, cell tower rights or mineral rights that are dividable. Even with all these factors you can still suffer a complete loss.
When a significant amount of money is invested, rental properties generally see the best return. Industrial locations, offices, retail locations and apartments usually appreciate. This will provide income on a regular basis.
Flipping houses is another way for an individual new to investing to make money. Purchasing a home below retail value, then adding value allows you to resell the house quickly. The location must be evaluated and a careful budget established. Also make certain not to become attached to the house you intend to flip. One of the most important factors is figuring out the level of risk you are comfortable taking. Some individuals would rather have a modest return with a very low risk factor. Others will risk a moderate risk in the hopes of a good return.
Some of the wealthiest people worldwide are developers. This type of investment carries a much greater risk than investing in standard real estate but offers a much higher return. Investing is all about how much risk you are willing to take to see a return on your investment as well as the multifamily leasing technology you have chosen to use.
Flipping a single family home has an average return of $15,000 to $30,000. Purchasing a single family home has an average monthly return of just $200 to $500 with the advantage of having your tenants paying off your mortgage over a period of time. You may also end up with an investment worth double or even triple what you originally paid. Vacancies, damages and maintenance can substantially cut down on your profit margin.
The risk on commercial investments is generally lower than single units. When you have a vacancy in an apartment building with 200 units your cash flow will not be impacted as severely. There is also less maintenance necessary for each unit. A commercial property will have a manager on-site with the ability to see problems the manager of a single family unit may miss.
Syndicated investments offer yet another option. Although you do have to share your return the syndicator hires a manager for the property so many risks are alleviated. They also have the ability to provide numerous efficiencies the smaller owners can’t. This will help lower your risk factor.