Different Types of Real Estate Investing

Real estate investing can be a great source of income if done correctly. There are many different types of real estate investing and Investing For Life is here to help you to decide which strategy is best for you. This kind of investment is usually large and needs careful consideration. When considering buying a property you need to keep your goals in mind.

Most real estate investing fall under three kinds of categories: residential, commercial and land. Real estate investing can become important in someone's life when they are looking at adding another stream of income to their portfolio, they are looking for a home to live in or they are trying to accumulate their wealth. This particular investment can also be part of the FIRE movement (check it out if you have never heard of it before.

Buy and Hold - Long-term Rentals

This kind of real estate investment is usually within the residential or commercial category. Usually in this scenario, you would be like an everyday kind of landlord that you think of when someone has a rental property. This buy and hold strategy is when a tenant signs a lease agreement with you (landlord), who usually plans to stay living there for approximately 6 months to a year plus. With this real estate investment strategy, usually the aim is pay a portion or all of your mortgage using the income you receive. While holding onto this property for the long term, you will also being gaining equity. Equity can be used to buy other houses, potentially without a deposit.

Buy and Hold - Short-term Rentals

Now a lot of you may have heard of Airbnb. This kind of real estate investment, relies on short-term tenants which can be used as an Airbnb or similar to it. This kind of investment is usually more like running a business similar to a motel and can be a lot more work depending on your situation. If you are successful with short-term rentals and you have minimum vacancies this can sometimes be more profitable then long-term rentals.

Flipping houses

This strategy is complete different to the others listed so far. In this kind of real estate investing, you search the property market for a downgraded house in an area that has great potential. Once you have found this property, you buy it, renovate it and then resell it for a profit. If you want to make extra profits, it is best if you do most of the renovations yourself. This is great if you don't want to keep hold of a mortgage for too long, if you want to learn a few handy man skills or just simply enjoy this kind of investing. The profits can be quick but just be careful when choosing a property. You cant always make a profit. 

House Hacking

Now this term is a bit weird because when I think of hacking, I think of some really smart guy at his computer trying to work through some codes but... no that is not house hacking. This strategy means finding someone to pay your housing expenses. This could either be by renting out rooms in your home or if are living in a duplex or multi-family home, you can rent out that side of the house separately for a great profit. This is a great technique because the income you receive should be covering the mortgage and other housing costs. Practically living for free! What a dream.

Wholesaling houses

Wholesaling houses can be a lubricative strategy if mastered well. In this kind of strategy, you never actually buy a house, you are never the landlord or really have anything to do with the house after it is sold. The way this technique works is by finding a house that isn't in the market yet and when you find the house you put it under a contract to buy. After you have come to a price agreement with the seller, you then go find another investor who is willing to pay more for the property then originally agreed on. After this process is complete you have gained profit in the difference between the original amount agreed and the amount you sold the house for to the other investor. Here is a scenario: You find a house for 100k and sign a contract to buy if for 100k. Then you found another investor who will pay 110k for it. This means that you have now made 10k in profit.

Investing For Life wants to remind you that all strategies can be risky. There are many different types of real estate investing and I hope this guide helps you determine which will be best for you.