Make Money While You Sleep: A Guide to Types of Real Estate Investments
You work hard for your money. Make it work hard in return.
Making money in your sleep may seem too good to be true. But if you choose the right types of real estate investments, you could make this dream a reality.
You might be thinking, with all the uncertainty in the economy, is now the time to turn to real estate investments? What about mortgage rates? How do I manage the risk?
Let us take you through the 4 types of real estate investments that could make you a bundle of cash while you’re catching z’s.
Rentals
Rentals may seem to be the perfect hands-off money making project.
You set up the mortgage, get tenants in, and then they pay it off for you, whilst you keep what’s left over. Sounds very appealing, and it has worked out for many investors.
However, there are a few pointers to keep in mind to make sure it lays the golden egg.
In It For The Long Haul
If you think you’re going to make a fast buck, think again.
If all goes according to plan, at the end of the mortgage term you’ll be the sole owner of a property that’s well maintained and hopefully worth many times more now than what you put into it.
That could well be true if you remember to set aside money each month to cover all of your obligations, as well as marketing costs and maintenance.
Even the best tenants move on, so you need to keep something back to guard against voids. Furnaces, sidings, and roofs all need replacing eventually, so remember to factor in money for these expenses.
Great Time for Rental Investments
With demand for properties outstripping supply, 2018 could be a great time to enter the rental market. If you’re in a strong position to buy, the tenants will be there, as fewer people will be able to afford to buy.
The other big question to think about is mortgage rates. With rates for a 30-year mortgage currently averaging at 3.85%, the rates have actually dropped over the last year.
With rates this low, and predicted to remain low for the foreseeable future, buying as an investor is a very attractive option.
If you’ve had a windfall and are wondering whether to pay off your existing mortgage or invest, click here to check out our guide.
Other Rental Options
Aside from the traditional, long-term tenant model discussed above, you could also investigate buying a vacation rental, or renting out your property on a short-term basis, such as through Airbnb.
The two most important factors to consider are what you pay for the property and the location. Make sure you undertake thorough research before proceeding.
Get it right on both fronts and this could bring in some serious cash in a much shorter space of time.
REITs
A Real Estate Investment Trust or REIT is a company that generates income from property ownership and management. Typically they specialize in certain fields, such as residential buildings, healthcare facilities or offices.
How Do I Invest?
There are three models – equity, mortgage and hybrid REITs. They are owned by their shareholders, and this is where your investment could come in. You can buy shares by buying shares directly on an open exchange or through a mutual fund.
Pros and Cons
Pros include the fact that this is a hands-off investment, and REITs are required by law to pay 90% of their income as dividends to shareholders. Also, as a group of investors, you have more collective buying power than as an individual.
Cons include the fact that the high dividend payment requirement can lead REITs to take on debt to fund future expansion. Also, you are sensitive to slumps in the real estate market or rate changes, for mortgage REITs.
Property Flipping
With flippers averaging a profit of $64,284 in the first quarter of 2017, it’s not hard to see why property flipping is one of the most attractive types of real estate investments out there.
The question is, how do you do it in your sleep? Daily site management and Saturdays with a paintbrush not really being your style.
Crowdfunding
Let somebody else do the sourcing, management, and haggling with contractors for you. You, along with others, simply make the initial investment.
If you’re thinking of this option, make sure you use a platform that performs rigorous background checks on the businesses involved. Check out their portfolio of completed projects to make sure they’re the real deal.
Commercial Real Estate
If you are in a position to secure financing, commercial real estate can be an enticing prospect. Typically, business leases run for several years, much longer than residential.
Consider mixed-use if you’re looking to spread the risk. Having a mix of different types of units, such as office, commercial, services and even residential can help to diversify your income.
If the property market hots up in a particular sector you’ll be better placed to take advantage of that.
Whatever type of real estate investment you choose, it makes good business sense to get advice from seasoned professionals, like Pembrook Capital Management.
Click here to see how they can help you make sure you put your money in the right place.
Best Types of Real Estate Investments: The Takeaway
We know that money doesn’t grow on trees, but with some careful market analysis and wise investment, there are several types of real estate investments that could help your money to grow while you sleep.
Consider whether you have the patience for long-term gains, such as a rental which could help in retirement. If you’d like to draw income right now, REITs and commercial properties could be the way to go.
Having diversified income streams make sense in the uncertain current climate. With savings interest rates close to historic lows, investing in real estate makes good business sense.
Be sure to speak with your tax and legal advisers before committing to any real estate investment, to decide whether it is as good as it seems on paper.
At What Your Boss Thinks, we want you to strike the balance between making money and keeping your life in balance.
Click here to see how you can increase your productivity.
