When you think about real estate investing, the first thing that probably comes to mind is your home. Of course, real estate investors have lots of other options when it comes to choosing investments, and they’re not all physical properties.
Real estate has become a popular investment vehicle over the last 50 years or so. Here’s a look at some of the leading options for individual investors, along with the reasons to invest.
- Real estate is considered to be its own asset class and one that should be at least a part of a well-diversified portfolio.
- One of the key ways investors can make money in real estate is to become a landlord of a rental property.
- Flippers try to buy undervalued real estate, fix it up, and sell it for a profit.
The are two primary approaches to flipping a property:
- Repair and update. With this approach, you buy a property that you think will increase in value with certain repairs and updates. Ideally, you complete the work as quickly as possible and then sell at a price that exceeds your total investment (including the renovations).
- Hold and resell. This type of flipping works differently. Instead of buying a property and fixing it up, you buy in a rapidly rising market, hold for a few months, and then sell at a profit.
With either type of flipping, you run the risk that you won’t be able to unload the property at a price that will turn a profit. This can present a challenge because flippers don’t generally keep enough ready cash to pay mortgages on properties for the long term.
