There was a time when investing in real estate was considered a prerogative of wealthy individuals. But today, it is possible for anyone to invest and earn profits through real estate investment. In fact, realty TV shows like flip or flop are encouraging common people to take up real estate investing through the method of fix and flip. Easy availability of finance from banks and other lenders has made it possible for anyone to earn money from real estate. Success stories of individuals who made millions of dollars from real estate investing have also played their part in popularizing real estate investment among common people.
Options available to you in real estate investment
Leveraging other people’s money is the best feature of real estate investment. Banks are ready to finance up to 80-85% of the purchase price of the property to eligible buyers. This means you can buy a home worth $200000 by just paying $40000 while the rest is provided by the lender and you can return this money with interest over a long period of time.
Fix and flip is a method of real estate investing where an investor finds a home that is available at less than its fair market value. He purchases it and renovates it to make it attractive and desirable for potential buyers. He then sells it at a higher price to book a handsome profit. If you can find distressed properties and quickly renovate them, spending small amount of money, you stand to gain rich dividends through fixing and flipping.
For example, if you buy a home for $100000, spend $20000 on its repairs, and sell the renovated house for $200000, you can make a profit of $80000 in very quick time. Though it is easier said than done, there are many investors who have made a fortune by fixing and flipping homes. Of course, you need to have the ability to spot distressed properties. You also need to put together a team that knows how to transform a home quickly by spending least amount of money. You should keep an eye of foreclosures and motivated owners ready to sell their properties at less than the market value.
Making money with rental income property
This is perhaps the most common and highly popular method of real estate investing. It helps an investor in buying an asset that increases in value over a period. But more importantly, he can start earning a second stream of income with rental income from his property.
There is a basic difference between fixing and flipping and investing in a rental income property. You buy a property, fix it, and then sell it as quickly as possible to book your profit in the first method of real estate investing. But when your aim is rental income, it is a long-term investment strategy where you hold on to your property to enjoy rental income. You decide to sell it only when its market value has gone up significantly. This way you continue to earn rental income for a long time and then benefit by selling the property.
There are many more methods of real estate investing. One benefit that is common to all these methods are tax benefits that you get from the government when filing your income tax returns. You can deduct a certain percentage of the interest paid on mortgage when computing your income tax. Also, expenses like mortgage insurance are also deductible.
Now that you know that real estate investment is possible by utilizing other people’s money, it is time to spring into action and try your hands at one of the methods for real estate investing that seems easier to you.
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