There are different types of real estate, and different ways to
invest in them. Which way is best is for you to decide,
according to your particular needs. Here are a few ways to
consider, with their advantages and disadvantages.
1. Rental houses. Advantages: One of the easier ways to get
started, and good long term return on investment. Disadvantages:
Being a landlord isn't much fun, and you typically wait a long
time for the big pay-off.
2. Rent-to-own houses. Advantages: When you buy, then sell on a
rent-to-own arrangement, you get higher rent, and the buyer is
usually responsible for maintenance. Disadvantages: The
bookkeeping is tricky, and most tenants don't complete the
purchase (this can be an advantage too, but it does mean more
work for you).
3. Low income rentals. Advantages: The same as with any
rentals, but with higher cash flow. Disadvantages: The same as
with other rentals, but with more repairs and tenant problems.
4. Fixer-uppers. Advantages: A quick return on your investment,
and it can be more creative work. Disadvantages: Higher risk
(many unpredictables) and you get taxed heavily on the gain.
5. Buy for cash, sell for terms. Advantages: You get a high
rate of return by paying cash to get a good price, and selling
on easy terms to get a high price AND high interest.
Disadvantages: You tie up your capital for a long time.
6. Buy land, split it and sell it. Advantages: It is simpler
than most real estate investments, with the possibility of great
profits. Disadvantages: It can take a long time, and you have
expenses, but no cash flow while you wait.
7. Boarding houses. Advantages: You can get a lot more cash
flow renting a house by the room, especially in a college town.
Disadvantages: You can get a lot more headaches renting a house
by the room, especially in a college town.
8. Commercial real estate. Advantages: Long term triple-net
leases mean little management and high returns. Disadvantages:
Tough market to break into, and you can lose income on vacant
storefronts for a year at a time.
9. Buy, live in it, and sell. Advantages: The new tax law means
you can fix it up, and sell for a big tax-free profit after two
years, then start the process again. Disadvantages: You have to
move a lot.
10. Speculation. Advantages: Buying in the path of growth and
holding until values rise can yield large profits, especially if
you buy low to start. Disadvantages: Prices aren't that
predictable, you have expenses with no income while you're
waiting, and transaction costs can eat much of the profits.
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