Building a real estate portfolio can allow you to live the life you’ve always dreamed of by building lasting wealth and financial independence. Many will immediately think of the stock market, mutual funds, or financial advisors when people hear investing. However, real estate offers an alternative approach to investing that has many advantages that traditional stocks do not offer. For example, real estate investing offers built-in collateral. If the investment does not go as you planned, you have a physical property to sell to recoup some or all of your investment. Real estate investing also offers you varying degrees of involvement, so you can decide if you want to be a silent investor, a house flipper, or a landlord.
Dipping Your Toes
If you are interested in property investing, but you aren’t very keen on owning properties or managing real estate, you can get involved as an investor in people who buy, sell, develop, and manage properties. Yieldstreet has allowed its investors to invest in real estate projects and investment companies, so they can benefit financially without having actually to do the work. Rental property, new property developments, and large commercial projects often require investors to get the project up and running. Yieldstreet pools the investor resources to fund larger real estate projects to allow smaller investors to participate in larger projects. If you read the online Yieldstreet reviews, you will see many new investors who had highly positive experiences with this alternative investment company. While no investment is without risks, Yieldstreet allows you to dip your toes in the investment pool to see how you like it.
When you invest in other people’s projects, you will receive payouts or dividends that will, over time, pay back your initial investment and create profit for you. When and how much you receive will depend on the agreement you made when investing, so it is important to go over your contract’s details with your investment team before investing money. You can also talk to your financial advisor about exempt-interest dividends to reduce the amount of taxes you have to pay on your payouts. Generally speaking, dividends are considered taxable income. There are specific requirements for dividends to be tax-exempt, so it’s something to look into before investing to maximize your profits.
Your investment can create a solid passive income for you and increase your net worth without you having to leave your full-time job. However, if you decide you want to become a full-time real estate investor, starting out slow will allow you to build your portfolio first. You can sit down with your financial advisor to create an investment strategy that will work for you.
Buying and Selling
If you are ready for a higher level of involvement, you can start buying and selling properties. Flipping, renovating, and selling properties for a profit has been made popular through a variety of reality TV shows. While it is not as easy as these shows make it seem, there is great potential or profit in house flipping if you learn to do it efficiently. House flipping is a form of alternative investment that requires no special degree or training.
The first step is buying a house at a great price that needs renovating in a promising neighborhood. The idea is to buy a bad house in a good neighborhood, so there is plenty of room in your budget to make the needed renovations and still sell it for a profit. Take your own mortgage 101class by reading as much as you can online about mortgages and how they work. When you are planning to flip a house, the goal is to get a low monthly payment. It doesn’t matter what the long-term terms are of the loan because you’re only going to own it for a few months. Get the lowest monthly payment you can get because the less you payout, the more profit you’ll be able to make.
Depending on your lender, you may choose between a fixed-rate mortgage or an adjustable-rate mortgage. If rates are low, go with the adjustable-rate mortgage because you aren’t planning to own it long enough for the rate to increase. You will need to take your monthly mortgage payment and your closing costs into consideration when tallying up your expenses. You want to have plenty of money to spend on renovations, so the less you can spend on other things, the better.
When choosing what renovations to do, look at the other houses in the neighborhood. You want to make your house sought after, but you also need to determine your selling price based on the neighborhood, so going overboard on renovations will not benefit you when it’s time to sell. Research the local market and comparable houses that are selling to help you determine what features buyers are looking for right now.
You also need to talk to your tax accountant to learn about capital gain, and what information the IRS will need at the end of the year for your tax return. Rental income is taxable income, so you need to be prepared with your business deductions to limit what you may owe in taxes. With a lot of hard work and not too much money, you can create good news for you and your family through smart investments and a growing real estate portfolio.
If you are looking to sell a house you’ve had for a while that you’ve either lived in or have been using as a rental, you want to get your payments as low as possible again in order to make needed renovations and still turn a profit when you sell. One way to help with this is to refinance the house when rates are low. A higher interest rate is going to cost you more money in the short-term due to a higher monthly payment, but also in the long-term as you are paying more for the house. You can calculate refinancing costs to determine if refinancing the property will get you a lower interest rate. If you already have a low-interest rate, it may not beneficial to refinance.
Finally, you may choose to build your real estate portfolio by buying properties and renting them out. Becoming a landlord for residential or commercial properties is a great way to build wealth over time. While being a landlord is a lot of work and requires a large upfront investment, if you are successful in managing the properties, it will pay off in the long-term. You can get advice for managing real estate properties online, from other landlords, and from the scores of books, videos, and information available on the topic. Similarly to flipping houses, managing real estate is not easy, however, anyone can learn how to be successful at it. Being open to learning and networking with successful landlords is one of the best ways to succeed.
You can choose to manage the properties yourself or hire a property manager. The goal is to have as fewer vacancies as possible, which means understanding the low real estate industry, utilizing property management software that will keep you organized and efficient, and be open to new ideas such as turning some of your properties into an Airbnb. Regardless of your financial situation, you can start investing in real estate property in the near future because there will always be a success if you are determined enough to make it work.
When you own and manage properties, it is critical to protect your investments with adequate insurance. You can visits websites like tulsainsurancegroup.com to get all the information you need and connect with a representative who can help you. The Tulsa Insurance Group has extensive experience working with investors to protect their properties. There are so many things you cannot control or plan for so the right insurance is the only way to protect your properties and your business. You can protect your properties from weather damage, storms, hail, tornados, hurricanes, fires, and other unexpected disasters with the appropriate insurance plan. Without proper insurance, you can lose your entire investment in a day with little or no warning.
You can also protect your business from a potential lawsuit that can otherwise be damaging. For example, as a landlord, you may be a target if some people assume you are rich. You may get sued for accidents or injuries on your property even if they weren’t your fault. You may also get sued as a result of the actions of your tenants. It is important to have proper insurance, as well as a detailed list that is enforced with the rules of the property. For instance, if you allow dogs on the property, you may be opening yourself up to a lawsuit if your tenant’s dog attacks someone.