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3 Ways to Invest in Real Estate

According to CNBC, 23% of Americans think that the best way to build wealth is by buying real estate, and these people are really on to something. Investing in real estate is a great way to spend your money because even though house value will depreciate with the years, the land value will increase in average 3.5% each year, making real estate one of the most attractive markets to invest in. At the end of the day, the need for housing will always be a basic necessity. From long term investment (buy and hold) and short term investments (house flipping) the are many ways you can invest in real estate. Here we are going to talk about the difference between two of the most popular ones, and another way that not many people might think of as an investment: House flipping, buy and hold and owning your own house.

#1 House Flipping

House flipping is one way to invest in real estate. Even though it requires more time and effort from your part, it is a good way to make money out of your investment in a shorter period of time. It implies buying a property below market value and sell it for a higher value once it is renovated. These below market value houses can often be found in property auctions. In December 2022, a house was sold in a median of 37 days so you can get your money back in a relatively short time after you buy an investment property and renovate it. In other words, flipping houses implies putting labor to increase the value of the property. On the other hand, flipping houses has its cons as well. Not enough money to finish unexpected work on the house, not enough time to oversee renovations or sometimes the property is more damaged than anticipated.

#2 Buy and Hold

Buy and hold is considered a longer-term real estate investment. It includes rental properties that can provide passive monthly income, for as long as you have tenants in the house, which can be attractive for many people. Of the 19.95 million rental properties in the US, about 70% are owned by individual investors. On the other hand, not everyone is ready to be a landlord and deal with the legal implications of it, or want be responsible for the cost of maintaining a house. However, newer trends such as Airbnb rentals are something that could be worth exploring too. You will be spending in maintenance but not stuck with long term tenants. One of the most attractive things about buy and hold is that even during times of decreasing prices, land value will almost always rebound and be higher. The longer you keep your investment property, the more you can make out of it.

#3 Owning Your Own House

Many people might not see it as one, but owning your own house is also an investment. Like we mentioned above, land value will always go up so the property you buy today will be worth more in a few years. On one hand, you’ll be paying a mortgage on your own property instead of paying rent. However, you will also be dealing with maintenance, broken pipes, and all things related to keeping the house in good shape. These are thing you do not worry about when you have a landlord taking care of the property for you .

Finally, investing in real estate comes with pros and cons. House flipping, buy and hold, and owning your own house all come with work to be done and responsibilities. Furthermore, as an investor you should decide not only what kind of investment you are most attracted to but also what aligns better with your short and long term goals, so you can take the time to learn and become an expert in that area.

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