Real estate investment is considered integral to financial planning. Since time immemorial, real estate property has been at the heart of human civilization. Legal and political enthusiasts would recall how social contract theories were shaped by the need to protect personal properties. Even historically speaking, humankind underwent revolutionary changes because of the need to preserve and protect their properties. Hence, it is unsurprising that modern-day investment goals are almost incomplete without real estate investment.
But, despite being an old-age form of investment, real estate investment can be tricky. Without forethought, one cannot simply wake up one morning and invest in real estate. Even the most seasoned investors would tell you that real estate investment is not easy and can be as mind-boggling as stock market investment or crypto investment. In today’s article, we shall learn a few things about how to reap profits from real estate investment.
1. Watch out for the location
Appreciation of land is what will give you profits. But, to say that you buy land and will necessarily profit is wishful thinking. You must understand that the property’s location is vital in determining the value appreciation. So, make sure that you have chosen the location right. Many real estate investors invest in underdeveloped land and develop it over time. They usually invest in land to which the city will expand and which will witness an influx of human population. Keeping the potential in mind, these investors invest in the development of the land to sell it off for profits when the time comes. This is one example of how location can bring your fortunes. Always choose a property where there is a potential for relocation and commercial development.
2. Vacation rentals
Lately, vacation rentals have become a great source of income for real estate investors. While you don’t need to own a property to provide vacation rentals, having one is significant leverage. The presence of the property in a tourist-friendly location can spice up your income potential. As I said, location is everything! Once you have the right property at the right location, just rent it out for the vacation mongers. These people will pay a lot if they get the right comfort at the right time.
3. Go Commercial
Of course, there is no denying the commercial angle to real estate investment. With sound planning, one can exploit real estate properties for commercial purposes. With time, people are venturing into businesses more than ever and will need office space to operate their businesses. You can invest in complexes, malls, or whatnot depending on your resources. You can start small and rent a space back in your home for commercial use, subject to local rules and regulations. As long as you add value to the property over time, you will always find a good amount of money coming into your bank account from the property.
4. Investment through Real Estate Investment Trusts
Let me briefly tell you what Real Estate Investment Trusts or REITs are. REITs enable investors to invest in real estate without having to purchase a property. What these REITs do is that they invest in several properties or mortgages, and sometimes both. These REITs are publicly listed, meaning you can trade in their shares and make liquid money. An added advantage of these REITs is that they allow the investors to spread their money across different properties. Also, the value of these REITs depends on the real estate market, so one does not need to worry about stock market fluctuations.
5. Fix and Flip
Although this strategy comes with a high risk, it does work out pretty well for astute investors. This fix-and-flip strategy entails an investment in a repaired and renovated property only to be sold for a profit. This comes with a high risk because many investors overestimate the prospective worth of the renovated property. If you put too much money into the property and fail to understand the demands of the market, you will incur losses, or the profit margins will be dismal. Thus, engage in the fix-and-flip strategy only after having done your homework on the target audience, target market, and overall costs involved, among many other things.