Finding Your Investment Style

You are ready to get started in real estate investing. What should you do next? There are several paths you can pursue in real estate investing and the first step is to determine which investment type is best for you. Generally there are three types of real estate investments: Rentals, Flips and REITS/Syndications deals. Determining your investment type is a very personal decision. Each type has advantages and disadvantages. Determining the amount of work you want to put in, your risk level and the returns you want to achieve are very important in evaluating the various types. Below is a comprehensive list to help you find the one that works best for you.

Rentals

There are several types of rental properties, from long to short term, storage to vacation rentals. High level, rental real estate investing is owning a real estate property that is used or occupied by another party, the tenant. In exchange for renting the property the tenant provides the investor with rent.

Pros: You are able to achieve returns in multiple ways, through the cash flow from the rents and from appreciation of the property's overall value. There are often tax advantages available for rental properties, including the ability to defer taxes by using a 1031 exchange when selling or, if it is a property you have owner occupied, you may be able to sell without capital gains tax if you have occupied the property for 2 of the last 5 years.

Cons: Rental real estate investing can be very time consuming. You can hire a property manager to decrease the demands on a day to day basis but it is seldom completely passive. If you self manage you may need to be available 24-7 for tenant concerns.

House Flipping

Purchasing a run down property, fixing it up and selling for a profit.

Pros: Substantial money can be made in a short amount of time. The key to any good flip is to get it completed as quickly as possible. Because of the short term nature of flips, returns can be made in a short period of time. You also have low to no maintenance and management costs since the property will be owned for a short period of time.

Cons: Risk, because time is your enemy on any flip it needs to be done quickly and you generally don't have time to wait out a down turn or a property that is not selling at the price you needed to achieve. Flips can also be a large amount of work and may require substantial capital upfront. They are often more affected by downturns in the market.

REITS/Syndications

Pooling money with other real estate investors to purchase properties. Often less hands on and more of a capital only investment.

Pros: Little to no work if you are a passive investor in the deal. Generally you will be able to purchase a larger property, that may have a better rate of return, by pooling money with others.

Cons: Less control over the investment. You need to make sure you trust the originator of the investment. Often they are the lead on the deal so it is important that they are knowledgeable and experienced in creating returns on these type of deals.

If you are ready to get started or have questions about real estate investing I would love to connect with you. Please reach out for a no pressure discussion about your goals.