Acquiring and owning real estate properties is both a lucrative and satisfying investment. Unlike bond and stock investors, real estate investors can use leverage to acquire property by settling a portion of the cost upfront and clearing the balance over time but at an interest.
Traditionally, you would be required to settle 20-25 percent of the total cost as a down payment. Today, you can get a deal that requires you to only pay 5 percent of the cost as a down payment. After payment of the down payment and completion of all the necessary paperwork, you will get full control of the property.
It is also possible to take a second mortgage on your home to make a down payment for another property. With these levels of convenience, it is possible for families to venture into real estate. Below are some real estate areas that your family can invest in.
If you or any other family member has renovations or DIY skills, acquiring rental properties is a great and lucrative opportunity. All you will require is patience to handle tenants. This real estate investment strategy will demand a significant amount of capital to cover vacant months and up-from maintenance expenses. The sale price for new homes increased between 1940 and 2006, according to United States Census Bureau data, and later dipped during the 2008 financial crisis.
The current sale value of real estate properties is above the pre-2008 highs. While this is good news to property owners, we are yet to have a clear projection of the long-term effects of COVID-19 on the value of the real estate.
Real Estate Investment Groups
REIGs is an ideal option for individuals who would love to own property without experiencing the hassle of financing the project. Real estate investment groups can be likened to micro mutual funds investing in the real estate space. If you are investing in Toronto real estate under this program, for instance, an investment company will have built or bought condos or apartment blocks and allows you as an individual investor to buy them through the said company. You will automatically become part of the group.
The individual investor will own one or several units of living spaces within the block, but the company in charge of the investment group manages the entire block collectively. The company is in charge of interviewing tenants, advertising vacancies, and handling maintenance.
To compensate itself for offering those management and maintenance services, the company collects a small percentage of the rent. Under a typical REIG, the lease is in the name of the individual investor. All units are expected to pull a part of the rent to insure against occasional vacancies. With a common pool, you will be able to receive an income even when your property is vacant. Provided the vacancy rates for the pool do not get too high, there will always be enough funds to cover costs.
If you are well experienced in the world of real estate, particularly in valuation, renovations, and marketing, then house flipping is an ideal venture. This investment will demand capital and expertise to oversee or do repairs when needed. Property flipping is typically the wild niche in real estate, just like day trading in forex trading. A real estate flipper will buy an undervalued property with the intention of reselling it at a significant profit within six months.
Most property flippers do not invest in improving the property. For them to make profits, the property must have an overlooked intrinsic value. When a flipper is unable to dispose of the property in good time, he or she might find himself in trouble because most of them do not keep cash at hand for long-term mortgage servicing. This is the ugly side of property flipping because it can result in snowballing losses. There is yet another type of property flipper who will buy a piece of property at a reasonable price, add value to the property and resell it at a profit. While this is a great long-term investment strategy, you can only acquire one or two properties at a time.
Regardless of whether you use your property to generate revenue or you are just biding time for the value to raise, you can always design a real estate investment program. With some property sellers demanding a low down payment, it is possible to multiply your wealth with just a little patience and expertise.