Jake Tuff 
Real estate is one of the largest asset classes, yet an investment that requires careful thought and consideration when selecting which type of property to invest in. Your risk tolerance and desired level of involvement must both be factored in when making this decision.
Investors seeking a hands-off approach might prefer purchasing rental properties and hiring a property manager; those preferring more active involvement might find developing vacant land or rehabbing residential homes more fulfilling.
Buying a Home
Residential real estate investments can be an excellent way to both make money and help those in need get homes they need. Investments can either be passive or active; active investments require more work from the investor – such as flipping properties or managing residential rental property – however they also tend to carry greater risks and have the potential for greater returns.
Passive investments require less work. Examples include purchasing real estate investment trusts (REITs), investing in real estate funds or crowdfunding real estate deals – these forms of passive investing offer similar exposure to the market and may help diversify your portfolio.
Real estate investing can be an excellent way to increase income and build wealth, but success will take time. To be effective at real estate investment, you need a comprehensive knowledge of the field as well as an effective business strategy which will allow you to avoid potential pitfalls and maximize returns from your investments.
Buying a Commercial Property
Commercial real estate investments allow property investors to purchase anything from office spaces and retail stores to warehouses – and can often offer higher returns than residential investments, prompting many individuals to include it as part of their portfolio.
Before searching for commercial property, make a plan on what type of business you intend on running from it. This can help guide the types of tenants to seek and the space required; also forming ideas ahead can save time and money during the buying process.
Once your goals have been established, gather a team of professionals to assist in your purchasing and management processes – lenders, appraisers, attorneys among them. It would also be prudent to create or find a spreadsheet that can serve as your underwriting and investment strategy tool in real time.
Buying a Rental Property
Real estate investments often include buying rental property to collect monthly rent and turn a profit while simultaneously building wealth through property appreciation. Before making this choice, however, investors should carefully evaluate all financial implications and laws associated with such an endeavor before making their final decision.
When looking for rental properties, target neighborhoods where construction projects are scheduled. This will increase supply and create greater demand. Also consider investing in turnkey rentals where the home has already been renovated and is already occupied by tenants; this can make becoming a landlord much simpler.
Before purchasing a rental property, calculate its return on investment (ROI). This will help determine whether or not it fits with your financial goals and needs. When doing this, be sure to take into account expenses like mortgage interest payments, property taxes, insurance premiums and maintenance costs as part of the calculation.
Buying a Flipping Property
Renovation and sale are popular ways of making money in real estate, yet they are far from foolproof – in fact they represent one of the riskier investment strategies available.
Property flippers purchase run-down properties at low sale prices, upgrade them and quickly sell them at a higher profit margin for an impressive return on investment. This strategy can be profitable if the investor is willing to assume significant risk and conduct extensive research before buying properties at reduced sale prices.
Before investing in property flipping, investors must estimate its after-repair value (ARV). This estimate should include costs related to repairs, renovations and upgrades as well as its purchase price. A general contractor is an invaluable source for estimating these costs; additionally investors should hire professional designers or home stagers to prepare the home for resale; finally they should also consider which buyers in their target area would pay more for renovated properties.
