Investment portfolios, Passive income. Equity. Monthly rents. Tax breaks. These are some of the benefits that come with investing in real estate.
Investing in apartment buildings, commercial properties and single-family homes can bring extra income each month and big paydays, it also comes at a risk. The goal is to invest in properties that increase in value over time. Real estate investments, like all other investments, real estate doesn’t always pay off. Sometimes the real estate you invest in, loses value over time.
If you understand the risks and are willing to do the research, finding the best places to invest in real estate could provide you with a solid income boost. Here’s a look at what real estate investing entails and the benefits and possible downsides that come with it.
Real Estate Investing.
You have plenty of options when it comes to investing in real estate. You can purchase a family home, rent it out and collect monthly rent checks while waiting for its value to rise high enough to generate a big profit when you sell. Or you can purchase a small strip mall and collect monthly rents from hair salons,restaurants, kinyozi and other business tenants.
You can go bigger and invest in an apartment building with dozens of units, collecting a steady stream of rent checks from your tenants each month.
The key is to do your research to find out which type of real estate investing is the best fit.
Putting your money into investment properties can be lucrative, though it requires some work. First you buy a residential property, either a single-family or multifamily building, and purchase it, usually financing this purchase with a mortgage loan.
You can then either live in the property or rent it out as you wait for it to appreciate in value. If you rent out the property, you might be able to use these monthly checks to cover your monthly mortgage payment. Once the property has appreciated enough in value, you can sell it at a profit.
The challenge, of course, is that the property you purchase isn’t guaranteed to increase in value. bad investment odds can be lowere the odds of a by researching local neighborhoods to find those in which home values tend to rise. You should also work with real estate agents and other professionals who can show you historic appreciation numbers for the regions you are targeting.
You will have to be mindful of location. A home on a busy street might be more affordable but might not appreciate as quickly as one located on a quiet side street. An apartment building located next to public transportation might see a quicker jump in value than one located miles away from the nearest commuter/ bus station.
If you don’t want to take phone calls late at night from tenants complaining about furnaces that aren’t working or roofs that are leaking, you’ll have to pay a property management service. These services handle the daily work of maintaining and operating properties. They’ll also send repair technicians to properties that need emergency maintenance.
You can earn money by investing in commercial properties much the same way you do by investing in residential real estate: First you buy your property. Then you charge monthly rents to tenants. If the property’s value rises, you can sell the commercial space for a hefty profit.
There are many types of commercial properties in which you can invest here in Kenya. You can purchase an office building and charge companies to rent space in that building. Or purchase strip centers or other retail properties and charge monthly rent to business owners and purchase a warehouse and charge rent to manufacturing companies or retailers who need to store their products.
The risks are the same as they are when investing in residential real estate: There is never a guarantee that your commercial properties will increase in value, which is why researching the properties and the communities in which they sit is so important. You might also struggle to find enough tenants to fill that office building or retail center you purchased.
Investors who want to make money quickly often turn to house flipping. This is when you purchase a home for a lower price, renovate it quickly and then sell it for a fast profit. The key, of course, is to buy the right home. You’re not interested in monthly rents when flipping a home. Instead, you need to purchase a home for the lowest possible price if you want to make a good profit when selling.
Again, research is key. You want to find a home in an attractive neighborhood, one that attracts plenty of buyers. And you need to make sure the repairs required for the home aren’t so costly that they’ll swallow any potential profit.
If you’re handy enough to handle renovations on your own, you’ll greatly improve your chances of making solid profits through house flipping.
REITs ( Real Estate Investment Trusts)
Buying into REITs , short for real estate investment trusts, is one of the easiest ways to invest in real estate. Why? With a REIT, you invest in real estate without having to worry about maintaining or managing any physical buildings.
REITs are companies that own real estate, anything from retail properties to apartment buildings, hotels, offices or warehouses. When you buy into a REIT, you purchase a share of these properties. It’s a bit like investing in a mutual fund, only instead of stocks, a REIT deals with real estate.
You can earn money from a REIT in two ways: First, REITs make regular dividend payments to investors. Secondly, if the value of the REIT increases, you can sell your investment for a profit.
You can invest in a REIT just as you would invest in a stock. REITs are listed on the major stock exchanges.
By Rabin Eli