One of the most lucrative investments out there is real estate. Over the years, it has become a money-making venture for a lot of people, where they make thousands and millions of dollars by investing in the various types of real estate.
However, making money from such investments doesn't come out rightly. It takes a lot of persistence, dedication, commitment, research, and know-how to become successful in the business.
This means that you have to be equipped with the right information to enable you to make a wise and profitable investment.
Real estate has to do with land attached with either natural or artificial permanent improvement. Such improvements include houses, trees, fences, water, bridges, and mineral resources.
It is also an immovable real property that can be sold, bought, owned or leased by people for shelter, business, or investment purposes.
There are mainly four types of real estate, they include the following.
This is one of the most popular types. It involves leasing or selling a property to private individuals in residential areas. It is the type of real estate that people acquire to provide shelter for themselves. Such properties include condominiums, single-family houses, townhouses, mobile homes, duplex, and triplex.
When it comes to properties used for business transactions or trade, commercial real estate is the right type. This includes cinemas, shopping malls, restaurants, apartment buildings (which include smaller multifamily property that has six or more units), hospitals, hotels, and parking lots.
This is also used for business purposes. However, industrial real estate is very distinct from commercial real estate due to the way it is used for business. This type varies from factories to warehouses, power plants and solar generating stations, and food processing centers.
This type is used to generate raw materials, engage in agricultural produce, or for future development. Some examples are farms, orchards, underdeveloped raw land, and parcels of land for recreational activities.
Investing your money into any business can be a risky endeavor. This is why you must make sure that you do your research thoroughly to know the pros and cons that surround your desired business.
The real estate market changes from time to time. Therefore, you need to be well-informed about the changing patterns in price to enable you to strategize how to properly invest your money. This will prevent you from running at a loss.
After doing your research about the real estate market, consult a real estate professional that can guide you on the various steps to take for a profitable business.
Also, get a lawyer who specializes in real estate or property law to help you handle all the paperwork. They can also enlighten you about the various laws that regulate real estate in your country to effectively invest without problems.
What do you aim to achieve by investing in real estate? Do you wish to make it a long-term or short short-term investment? Is money the only reason why you wish to make such investments? These, among other questions, are what to provide answers for before making your investment.
Whether you wish to go for residential, land, commercial, or industrial real estate, you need to clearly define your choice and how you can easily handle it. You must also keep your property in good condition to attract profitable buyers.
The amount you choose to invest in real estate is also another crucial factor to consider. It helps you to determine the type of property you can afford and the expenses you might likely incur as you prepare it for the market.
The outcome of every investment is profit. Therefore, you need to ensure that the estate you are investing your money in is valuable and has a good return on investment. You can't afford to run at a loss if what you are investing in is not profitable.
This is another crucial factor to consider. If your property is situated in a rural area, you might likely generate low income. This is unlike when it is situated in an urban area where there is a high demand for accommodation, coupled with big businesses that will require the commercial real estate to function.
If you plan to relocate from where your property is situated, consider selling it. Alternatively, you can employ a supervisor to help you to monitor your property.
Doing this will help to keep your property in good condition. Hence, avoid investing in real estate if you know that you won't have the time or wherewithal to inspect your property at all times.
Endeavor to have a sustainable income if you plan on doing real estate part-time. This will enable you to have something to fall back on if the investment doesn't go as planned.
Don't just invest in a single type of real estate. You can take a risk by diversifying and investing in other types. This way, you will have multiple streams of income.
If you lease out residential or commercial real estate, it is pertinent that you know your tenants. Having people with no criminal records or history of vandalism will help to protect your property from being misused.
This is by far one of the most common and lucrative investments in real estate. It involves the leasing of residential or commercial properties to various people for a particular duration.
For instance, if you invest in a multifamily apartment with many flats, you can generate a lot of income from multiple tenants in one building. And you can even live in one of the flats if you so wish.
However, some downsides to this type of investment are the cost of maintaining the building, the hassles that come with finding the right tenant to lease the apartment, how to effectively manage the tenants, and how to fill a vacant apartment when a tenant moves out.
In all, rental investment is still very lucrative and can come in different varieties. Some of them include the following:
A vacation rental is always available for those who love to travel and go for tourism to various parts of the world. This process involves booking a property in your travel destination for a specific duration (usually short-term).
If you live in a tourist country, you can make a huge income by investing in vacation rentals when you lease your properties to tourists and adventurers.
This is another smart type of rental investment that is quite similar to long-term rentals. But in this case, the owner also lives in the building. It could be a duplex, multifamily house, or bungalow.
As the owner, you can also lease your BQ (boys' quarters) to someone instead of leaving it vacant. It's a very profitable investment that can generate extra income for you.
This involves the leasing of any type of real estate for a long period. It could be a year or more, depending on what's contained in the rental agreement.
A REIT is meant for an investor who chooses to invest in real estate without owning physical properties. In this type of investment, your money is used to purchase and operate industrial, commercial, or high-income properties. You can buy a REIT at the stock market where you get dividends after an agreed time, which is often based on your investment.
When it comes to one of the most capital-intensive and risky real estate investments that require a great level of dexterity and expertise, fix and flip reigns supreme. It involves buying an undervalued property, renovating it, then selling it for profit.
If you intend to venture into this type of investment, you need to know how to creatively give value to a property through renovation and making repairs that will generate income for you in the long-run. You must also have knowledge or experience in real estate valuation, renovation, and marketing to enable you to become successful at it.
This is a large-scale investment that often requires huge capital. You can buy fertile land for agricultural purposes or residential and commercial investments.
But before you invest in any piece of land, you must do proper research about the land and its locality. This will help you to ascertain whether it's viable enough for your building and would generate a good profit when you begin to develop it.
This can also be called “real estate crowdfunding”. It is quite similar to REIT.
It involves making an investment in residential or commercial real estate via online platforms created by developers for users to contribute money to develop or buy real estate.
Here, you don't need to own a physical property; you only need to invest your money through the online platforms with an amount that’s not always up to what is needed to buy a property immediately.
The investments are used to finance real estate projects, which will eventually generate income for you after a certain period.
The fulfillment you derive from getting returns from real estate investments cannot be overemphasized. This is why you need to ensure that you put some things in place for a profitable investment.