Ways to Make Your Real Estate Investment Pay Off

While buying your first property can seem like a major financial and personal milestone, it doesn’t come without its challenges. Fortunately, investing in real estate is one of the easiest ways to build long-term wealth and secure your future. Real estate investing requires minimal maintenance and operation costs, which means that you won’t need to spend much capital in order to get started. Moreover, interest rates are low right now which makes real estate an even more affordable alternative to stocks. The value of your investment will grow as well, so you can rest assured that your initial capital investment will be far from the final selling price of the property. No matter where you live or what your savings rate is like, there’s sure to be a wide variety of ways for you to make your investment pay off. In this article we explore seven proven strategies for accelerating appreciation and increasing rental yields on your real estate property.

Diversification Is Key

While real estate investing is one of the most profitable investment strategies available, it’s also one of the riskiest. All real estate is extremely risky, as it’s hard to predict the long-term performance of a market. The key to limiting your risk is to diversify. Diversifying means that you should have a substantial portion of your portfolio invested in a variety of real estate types. For example, a single-family rental property can be a significant portion of your portfolio. However, this does not mean that you should have investments in many different types of properties. You should have a significant portion of your portfolio in single-family properties, commercial properties, and even real estate crowdfunding.

Buy What You Know

As an investor, it’s important to buy properties that you’re familiar with. While you might be able to get a discount on your purchase price if you don’t know much about the property, you’ll end up paying more in operating and repair costs down the road. It can be challenging to know which properties to buy. That’s why it’s important to stay focused on buying what you know. Before you buy your first rental property, think about the markets where you’ll be investing. Some of the better markets to invest in are those with steady income streams, such as the Southeast and Midwest. In addition, there are a growing number of cities and regions that are attracting a large number of millennials due to low real estate costs and strong job markets. While you don’t have to buy a property that’s identical to your ideal property, you do want to make sure that it has many of the same characteristics. For example, a good real estate investment is one that has steady income and a long-term rate of return.

Hold Onto What You’ve Got

If you’ve done pre-purchase and other due diligence, you’ve made a significant investment. As such, you want to hold onto these assets for as long as possible and maximize the return on your investment. Real estate investors need to think about two main things while holding onto their properties: cash-flow and appreciation. When you are able to hold onto properties with strong cash-flow, you’ll be able to generate even more income, which will help increase your overall return.

Use a Real Estate Investment Trust

Real estate investment trusts (REITs) are similar to stocks, but they invest in real estate. The benefits of investing in a REIT include diversification of your portfolio and a positive cash-flow yield. REITs have many investors, which means that there is a large pool of capital to resell real estate properties. This means that you’ll have a greater chance of finding a suitable property at a reasonable price. Unlike stocks, most REITs don’t require any financial experience. In fact, they often focus on investing in reliable properties, such as office buildings, industrial properties, and shopping malls. This means that you don’t need to know much about real estate, allowing you to focus on more profitable investment strategies.

Increase Cash-On-Hand for Purchases

One way to increase the amount of cash that you put towards your next real estate deal is to make a cash purchase. When you make a cash purchase, you pay the full amount that is owed on the property. This can be a huge advantage over financing a property with a mortgage. For example, let’s say that you find a great deal on a five-unit condo building that you think will be a great investment. The owner is willing to accept one lump sum for the full amount. You’ll have to be ready to make a cash purchase, but it will reduce the amount that you have to outlay on the deal, making it more attractive. This can be a good strategy if you’re looking to get into real estate investing quickly.

Rent Out Vacated Properties

There are many cash-flow and appreciation opportunities that are just one step away from becoming vacant. For example, many investors rent out vacant homes after the owners move out. This property can be particularly profitable if the home was previously owned by a lessor. It can be a good strategy to rent out a vacant property if you have a large portfolio of properties that are generating a decent amount of cash flow. Like properties that are full, you can also screen potential tenants before renting to ensure that they pay on time and maintain the property appropriately. This will both improve your bottom line and help you get back to normal operations as soon as possible.

Don’t Be Afraid of Short-Term Holdings

There are many real estate investment strategies that can provide good long-term returns. However, there are some that are better suited for short-term gains. For example, short-term investments in real estate crowdfunding are a very volatile way to make money. These investments are typically pooled equity investments in real estate projects that are only going to pay out after they are completed. While they are a good way to make a quick buck, they are not a good long-term strategy. Similarly, real estate flipping is a great way to make money in a short period of time. However, it’s not a good long-term strategy as these types of investments lose value over time.

Wrapping Up

Real estate is a great way to build wealth and financial security. However, it is a high-risk investment strategy and can be very volatile. To maximize your investment, you should diversify your portfolio, hold onto properties as long as possible, use a REIT, increase cash- on-hand for purchases, don’t be afraid of short-term holdings, and rent out vacant properties.