How To Invest While Real Estate Is Roaring by Larry Alton
When the housing bubble burst in 2008, investors quickly pulled out of the market and have been wary every since. No one wanted to take out a major loan, and banks were also very concerned about lending for several years following what became known as the Great Recession.
But all that concern seems to be over now as report after report shows the positive upturn of the market in 2016. Home prices have risen a whopping 5.3 percent since the previous year, according to the National Association of Realtors. The same reports indicate that the increase in home prices will continue to rise, which makes it a great time for investors to get into the market with a promise of excellent returns in a short amount of time.
It could be said that real estate is currently the most popular form of investments. According to a nationwide survey from Better Homes and Gardens Real Estate, 89 percent of United States investors are interested in making strong investments in real estate.
With that much confidence in the market, all indicators point towards now as a great time to make a real estate investment. Here are some things you can do to invest now.
Start with the Basics
It’s always smart to take the “dip the toe” approach to real estate investments to make sure it will be a profitable venture and something you enjoy. “[It] gives you the opportunity to test the waters and see how you like the business before you get heavily involved,” says an article from the property management company Green Residential. You can’t simply back out of a huge property investment when you find out it’s not something you like. Starting small lets you get into the market first.
“With a basic rental, you’ll go through the process of searching for the best price, taking out a mortgage and buying the property, working with tenants, managing the land, and supervising the finances,” the article continues. “This shows you every aspect of real estate and allows you to determine which aspect of investing you like best.”
Diversify Your Investments
It’s also wise not to put all your eggs in the same basket. You want to cover all your bases in case the real estate market does something crazy.
Real estate is its own private entity when it comes to the stock market. It doesn’t move the same way that stocks and bonds do, so diversifying your investments can stabilize your finances, even if the real estate market suddenly dips.
Most experienced investors recommend allocating five or 10 percent of your overall portfolio to this endeavor, but it doesn’t need to be the only thing you invest in. Look into other factors that can add some extra stability to your portfolio, and your investments will naturally balance each other out.
If you’re looking to make a profit off of your investment, it most likely won’t happen right away. It usually requires a holding period in which you let the value grow before selling again. In the meantime, you need a way to make money, and renting is the perfect option.
Don’t be fooled into thinking this will be easy, however. It will take time and work to keep your property up to tenant standards, although you could use a property management company to handle the brunt of the work. “[Real estate] provides really great monthly cash flow, but you have to work for that,” CFP at ARGI Financial Group Jeanne Fisher told CNBC. “There are two ways to invest, you’re either going to invest the money or you’re going to invest the time.”
Renovation is a great way to both speed up the profit collection process and extrinsically raise the value of any property. Whether your property is old and outdated or newly built and trendy, there are always things you can do to update.
Pay attention to areas with the highest ROI, like kitchens and bathrooms. A new countertop or even a fresh coat of paint can add several thousand dollars to your final asking price.
Look into ways that you can improve efficiencies as well. New windows and doors, a repaired roof, a new HVAC system, and attractive window treatments can be fairly inexpensive updates that will lower utility bills. It will make the home less expensive to keep over time, and it’s a great argument for raising the final asking price.
There are expansive benefits to investing in real estate, but you have to be patient and know how to work the market. Over time, property values will rise, and you’ll collect the profit. What you do during that waiting period will make all the difference.