5 Ways to Invest in Real Estate
There's no one right way to invest in real estate. Some people love the idea of being a landlord and collecting rent each month. Others want to channel the property brothers and flip houses. Whatever your jam is, there's no doubt that real estate is one of the soundest investments over time that you can make! Many of the world's billionaires made at least a good chunk of their wealth through real estate. And you can too!
If you're just starting out in real estate and investing, a great way to get in the game is through house hacking. You can buy a 2, 3, or 4-plex with traditional financing and with as low as 3.5% down (possibly less depending on your situation). You live in one unit and rent out the remaining units so that your tenants are paying your mortgage and hopefully more. You can save up the money you're saving and repeat the process.
Another great way to invest is buying single family homes and turning them into rental homes. The average rent for single family rental homes is up 13.3% this year from a year ago. The great thing about having a rental property that you plan to keep long term is that your costs remain (relatively) fixed but rents go up each year. Even if you are just breaking even now, over time you will see higher returns while also building equity in that property.
BRRR. And I'm not talking about the 85 degree weather! This stands for buy, rehab, rent, refinance. The idea is that you buy something in a distressed condition, that needs work just to make it livable. You should be getting this for under market value. You then rehab/renovate it so that it's really nice and desirable. Get it rented out so that you're making money each month on it. Then do a cash out refinance, and repeat the process!
Last but certainly not least, there's house flipping. This is where you buy a property that needs a lot of work, then you fix it up and resell it within a short period of time. This is one of the more fun looking ways to invest in real estate. We've all seen HGTV and let's be real, it looks really fun. But there's a lot more that goes into it than what Drew and Jonathan would have you believe. Still, if you educate yourself, you can make any one of these strategies work for you!
Of course you can mix and match many of these. You can live in the house you're flipping and if you live there for two years, a large chunk of your gains will be tax free (talk to your accountant or tax pro to get the deets)! This way, you'll build equity through the work you do and also during the time you're living there.
There are many ways to invest in real estate! The most important thing to do is to do your research, talk to a pro (like me!), and start doing it! If investing is one of your goals for 2023, let me
show you how to get there!