While real estate investment can be challenging and complex, the most difficult decision is deciding which investment strategy you wish to pursue. In the following article, Ron Cadman discusses the most common real estate investment approaches for prospective property buyers. Ron Cadman is the co-founder of the Phoenix-based real estate investment firm, Investar USA.
While anyone who wants to own their own home must engage in a real estate transaction in order to achieve that goal, real estate investment is a slightly different proposition. The purpose of home ownership is to provide a physical dwelling for the owner and the owner’s family, while simultaneously assuring a financial safety net. Real estate investment is meant to generate revenue, either through renovation and short-term sale, or through rental income.
The One of the best real estate investment strategy is – in my humble opinion – multifamily property rentals. This option gives investors a solid rental income that may quickly offset the original investment. However, investors have other options and methodologies as well. Here are three common real estate investment approaches.
Rental Property Purchase
Investors who want a hands-on approach to rental property management may wish to buy a single or multi-unit property and maintain it themselves. These investors may either live on the property or near enough to access it as the need arises. Investors who are comfortable handling repairs and coping with tenant needs may find this approach rewarding, but most buyers may prefer to use a management company as an intermediary.
Investment Through a Real Estate Investment Group
Investors who do not wish to handle the responsibilities of property management may be more comfortable partnering with a real estate investment group. A real estate investment group connects investors with properties – single or multifamily rentals of varying sizes – and then manages the properties on behalf of the investors. While this approach doesn’t give the investor as big a percentage of the rental income as the previous strategy, it may deliver a better long-term return, since the owner will not have to devote time, energy, and resources to property maintenance and tenant management.
This strategy is the riskiest, and requires a great deal of experience in property valuation, capital, and skill in construction or renovation management. While many investors prefer property flipping because they can see a return quickly, there are numerous variables that can interfere with fast and profitable outcomes. Moreover, if the investor chooses not to rent the property, it could stay on the market for years without generating any income.
While there are abundant other real estate investment approaches, these three are the most common and accessible to the novice real estate buyer. As long as you perform your due diligence, your real estate investment will have the potential pay long-term returns.
Ron Cadman has been a professional real estate investor for more than 30 years, and has founded real estate investment firms in the U.S. and Canada.