REAL ESTATE INVESTMENT GUIDE

 When you think about real estate investing, the first thing that probably comes to mind is your home. Of course, real estate investors have lots of other options when it comes to choosing investments, and they're not all physical properties.

• One of the key ways investors can make money in real estate is to become a landlord of a rental property.
• Flippers buy undervalued real estate, fix it up, and sell for a profit.
• Real estate investment trusts (REITs) provide real estate exposure without the need to own, operate, or finance properties 
• Real estate has become a popular investment vehicle over the last 20 years or so. Here's a look at some of the leading options for individual investors, along with the reasons to invest.

Rental Properties

If you invest in rental properties, you become a landlord—so you need to consider if you'll be comfortable in that role. As the landlord, you'll be responsible for things like paying the mortgage, property taxes, and insurance, maintaining the property, finding tenants, and dealing with any problems.

Unless you hire a property manager to handle the details, being a landlord is a hands-on investment. Depending on your situation, taking care of the property and the tenants can be a 24/7 job—and one that's not always pleasant. If you choose your properties and tenants carefully, however, you can lower the risk of having major problems.

One way landlords make money is by collecting rent. How much rent you can charge depends on where the rental is located. Still, it can be difficult to determine the best rent because if you charge too much you'll chase tenants away, and if you charge too little you'll leave money on the table. A common strategy is to charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit.

Flipping Houses

Like the day traders who are leagues away from buy and hold investors, real estate flippers are an entirely different breed from buy-and-rent landlords. Flippers buy properties with the intention of holding them for a short period—often no more than three to four months—and quickly selling them for a profit.

The are two primary approaches to flipping a property:

1. Repair and update. With this approach, you buy a property that you think will increase in value with certain repairs and updates. Ideally, you complete the work as quickly as possible and then sell at a price that exceeds your total investment (including the renovations).
2. Hold and resell. This type of flipping works differently. Instead of buying a property and fixing it up, you buy in a rapidly rising market, hold for a few months, and then sell at a profit.

With either type of flipping, you run the risk that you won't be able to unload the property at a price that will turn a profit. This can present a challenge because flippers don’t generally keep enough ready cash to pay mortgages on properties for the long term. Still, flipping can be a lucrative way to invest in real estate if it's done the right way.

REITs

A real estate investment trust (REITs)  is created when a corporation (or trust) is formed to use investors’ money to purchase, operate, and sell income-producing properties. REITs and sold on major exchanges, just like stocks and exchange traded funds (ETFs).

Why Invest in Real Estate?

Real estate can enhance the risk-and-return profile of an investor’s portfolio, offering competitive risk adjusted returns. In general, the real estate market is one of low volatility, especially compared to equities and bonds.