If you’re looking for something to invest your capital into, you might consider getting into real estate investing. Whether you are an individual or a business, this type of investment could be just what you’re looking for when it comes to increasing your wealth. You might also consider getting into rehabbing properties to get a further return on your investment.
What is Real Estate?
If you’re like most people, why you hear the term “real estate,” the first thing that probably pops into mind is a home, some land, or another type of building or structure. These, of course, are all kinds of real estate, but there is more to this definition.
When it comes to real estate investing, real estate can be all of the things listed above as well as any improvements made to these items. That means that if you buy a parcel of land and then add a fence, trees, or even a road, all of that is considered real estate as well. You have the option of adding a structure, and that would be considered real estate as well.
It’s also possible to buy a building with the intention of rehabbing properties. Again, the improvements made to the structure are included in the real estate category. The reason for doing this could be to get a return on your investment.
Benefits of Real Estate Investing and Rehabbing Properties
Since there are no guarantees in life, it’s hard to say that real estate investing or rehabbing properties will get you a return on your investment. However, historically, real estate has been considered one of the safest asset classes for investors. It also offers a potential for gain.
If you decide to get into real estate, you can expect some benefits that are often not found in other types of investing. A few of these are listed below.
If you have real estate profits, these are often treated as capital gains by the government, which are taxed at a lower rate than employment income. In addition, the tax basis for your property can decrease over time because of the tax code and depreciation. If you have cash flow from a rental property, it may be possible to claim those profits as self-employment.
When you purchase mutual funds or stocks, you are at the mercy of the market and time to watch them increase in value. If you are a major shareholder in the companies that you’ve invested in, you will then have a lot of say in how the operation. If you’re not, there is nothing you can do to improve your investment value.
When you invest in real estate, you have control over almost every step of the process. You can get better at negotiating price so you can get the best deal on a piece of property, as well as going into rehabbing properties and making improvements to increase the value. It’s also possible to find ways to generate more revenue from your real estate investing, such as adding vending machines or coin-operated laundry machines.
How to Invest in Real Estate
Most people think that only those with a lot of money can get into real estate investing and rehabbing properties. However, it might be possible to take on this task with very little money. You can even do it if you already work a full-time job. It all depends on how much time you want to invest in the process.
Some of the options you have when it comes to real estate investing include active and passive methods. Active methods include house flipping or rehabbing properties, rental properties, or Airbnb. Passive methods include private equity funds or REITs.
House Flipping or Rehabbing Properties
For this process, you would be going out and purchasing properties that need some work. The goal is to rehab the property to increase the value and desirability. It’s also a time to ensure the property is up to code, and aesthetically pleasing. You have the option of doing the work yourself or having a contractor do it for you.
The goal with this method is to get the property for as little as possible, make the improvements on a budget, and then sell or rent the house for a profit. Getting the flipping or rehabbing of a property done as quickly as possible is beneficial, as waiting too long means that you could lose money on your investment.
There are many different types of properties you can buy and then rent, including houses, apartments, office space, and industrial space. This process still requires some work on your end, including managing and repairing the property or hiring someone to do these tasks for you.
Having rental properties can give you long-term, regular cash flow. However, you will need tenants to accomplish this task. You will also be responsible for collecting their payments and dealing with any issues that might arise. If you are willing to put in the time and work for this investment option, it can be incredibly lucrative.
For this process, you would work with a company to rent out your home on a nightly or longer basis. Most people use this option instead of staying in a hotel. You have the option of renting out your entire home or part of it. You don’t need a lot of expertise or supervision to gain money from this investment option, as the overarching company handles most of the logistics.
Private Equity Fund
If you don’t want to be an active investor, there are some passive methods you can look into. A private equity fund is where investors pool their money together to make an investment. These can be a limited liability partnership that has a management group or designated manager.
You won’t have to actively participate in any of the property’s maintenance, but you will need to have some real estate knowledge to understand the risks and returns associated with this type of investing.
If you’re looking into this type of real estate investing, you will buy shares of a company that makes equity or debt investments in commercial real estate. You will earn income in the form of dividends from the investments. In many ways, this is similar to a mutual fund, and it gives ordinary investors the ability to access real estate investments.
Investing in real estate can be lucrative. There are ways to do it that don’t require a lot of upfront cash, but it could end up paying in the long run.