You wish to invest and you might not have any idea on how to use that money? The most common option, especially for those who are younger is usually the bank or the stock market. However, your money won’t go that far when it is in the bank and the stock market is quite volatile at present. You are probably wondering if investing in real estate is the best way to go. The answer is YES. Keep reading and you will realize why putting your money in this investment is actually the most ideal place for your money. You might assume that the growth of your investment in real estate would remain stagnant, but this is not case if you just know how to use them. Your purchase of a house and lot or a bare lot does not always entail taking residence there. This article will allow you to further explain your choices, especially when you have second thoughts about investing in real estate. First, we will discuss the different types of properties that are on sale on the market today and how you can use them to ensure that you have maximized the potential of your chosen investment.
In AssetColumn we have different kind of properties: Wholesale properties, Retail properties, Fixer uppers, Cash Flowing properties, and Turnkey properties. If you check out Asset Column frequently, you might already be familiar with several of these terms. However, if you aren’t familiar with these terminologies, allow us to define each one of them for you for your better understanding.
1- Wholesale Real Estate Properties
We begin with one of the most unfamiliar concepts of those without real estate experience which is a wholesaling real estate. In layman’s term, the wholesale of real estate is when the investor buys a property at an extremely cheap price while that property is still under a contract and the investor immediately assigns the contract after the purchase. If the investor decides to sell the property right away instead of assigning the contract, this transaction is still classified as a real estate wholesale. If you are unsure what encompasses assigning a contract, it means that an unrelated person can become the buyer of the property, even without the authorization of the current seller provided that the contract has stipulated a clause that states assigning the contract is possible. In addition to this, the original investor also has the option to immediately sell the property to another buyer who can flip out the property.
The secret to wholesaling real estate is to ensure that the final investor can also reap immense benefit from this transaction. Since the original investor would not be the final buyer, it is rather vital that there is room for the next investor to earn and profit from this purchase and the only way to ensure this is to purchase the property at a significantly low price.
2- Retail Properties in Real Estate
On the contrary, retail of real estate is not a direct contrast of wholesaling the property. Retail real estate is directly correlated to commercial properties like a mall, office buildings, lifestyle centers, factory outlets, or community centers. These establishments earn money mostly by renting out portions of their properties to business enterprises that sells goods or services. Another way that commercial properties can earn a profit is from an investment income which is simply defined as the gain from the sale of any capital asset, such as real estate. If you decide to invest in a commercial property, there are several benefits that are attached to this purchase. First, when dealing with an establishment that sells consumer goods, you can usually expect the lease to last for five years, along with a portion of their annual sales as part of the rental contract.
When dealing with a commercial property, the general costs of maintaining the property are also usually shouldered by the tenant. However, the retail real estate industry is not a cheap investment since it is usually larger in size and the interest and deposit required with this investment is typically higher than a regular property. Since the merchandising industry is an unpredictable industry, the profit that is expected from the income-streamed investment from retail real estate is also volatile and is also based on the status of the industry and the economy.
3- Fixer-Uppers in Real Estate
With a reality television show dedicated to this kind of properties, a fixer-upper is probably one of the more famous kinds of real estate investment. A fixer-upper is a property that is in need of maintenance work to transform it into a more livable place with a higher market value. This can also be called flipping houses, since this practice is made to ensure a greater return on the buyer’s investment.
When dealing with fixer-uppers, your cost to purchase the house is not the only major expense that you should consider. There will also be the expenses related to the reconstruction or the renovation or the redecoration of the entire house. You will spend money on paint, wallpapers, new tiles, and probably the labor of the people that you hire. This is also a time consuming project, since you begin with your ideas and you have to watch how your ideas will materialize while working on the property. However, the bright side of investing in a fixer-upper property is that the cost of the home is generally at a lower price range, since the price is usually decreased due to the state of the home and there is still a need to factor in the cost of the repairs.
4- Cash Flowing Properties in Real Estate
If you decide to splurge on an apartment building as an investment, why not use that investment to gain a steady source of income from renting it out as a residential complex? This might be the perfect chance to have a cash flowing property. There is a high demand for apartments that you can rent and it is your chance to rent out your investment and ensure a constant inflow of income. All you will need in this setup is a written contract or a lease and several tenants and you are all sent to be a full-pledged landlord. However, hold your horses; you would still need to factor in the expenses that are attached to renting out your property since you should charge the rental fee at a higher price to obtain an income. You should calculate all the expenses from the maintenance and depreciation of the property to the insurance and interest payments, along with the risk of the non-payment of your tenant. In the middle of all this, you should still maintain a profit for you to optimize the investment that you have made. You must also know that the maintenance fee for these types of properties isn’t as cheap. This is exactly the reason why a lease comes with the need for the renters to pay for a couple months worth of deposits and advances.
5- Turnkey Properties in Real Estate
The last real estate property that we will discuss is the turnkey property which is a property that has already been renovated and restored to a higher quality and the seller would only need to turn the key over to the final investor so that he/she can immediately rent out the units. With a turnkey purchase, the investor is now the end buyer of the property. We have discussed fixer-upper properties and flipping houses above, but the turnkey property is the end result of those investments. This kind of investment is quite pricy since most of the work is done at this point. However, the purchase price of the property itself is the only price that you will need to pay, apart from the usual miscellaneous fees. Moreover, owning a turnkey property is not as time consuming and labor intensive as other real estate investments since all of the required work is done for you at this point. With a turnkey property, everything is usually complete even the smallest detail so the investor usually does not have control over the design and structure of the property.
As you can see, there are several different ways to earn an income on your real estate investment. There is an investment for you regardless of the amount of your budget, since you can purchase a cheaper house and transform it or you can purchase a transformed house at a higher price. There is also a real estate investment for you depending on your personality. Are you patient and willing to take on a creative project? You can purchase a fixer upper and flip houses. Are you the complete opposite of those traits? Purchase a turnkey property and you would not even be required to lift a finger when working on the house.