Many of you will soon want to consider investing in Real Estate again. Are you considering buying a second home, or perhaps an Investment home?
These are questions that commonly come up. Now is a very good time to start considering as an option, the investing of your capital.
Now, there are different strategies depending on what you are trying to accomplish out there. The important thing is to figure out what you need and want, and what your end result should be.
by Anne Miller
You’ve got a little extra skin to throw in the real estate game and think purchasing a property that could give back to your bank account could serve you well.
But what’s the best choice, a vacation home or an income-generating investment?
The strategy: Buy a property, fix it up at minimal cost, and then cash in by renting it out at a rental fee higher than what you pay on the monthly mortgage. This type of real estate opportunity suits young business people and professionals who have income to invest but who can’t afford to wait years for a return on their investment and who are not planning for a long-term second home.
Many serious residential investors purchase more than two properties, becoming mini-rental moguls. The purchased property is usually close to the owner’s residence, which makes it easier to respond to any property management issues that arise.
To maximize income-producing investment, purchase property in an area short on rental homes. By short, we mean anywhere where the market is so hot that rentals don’t stay vacant for long. University towns, neighborhoods in good school districts, up-and-coming urban neighborhoods on the fringe of boom areas are all good options for this kind of investment.
If you want to profit in a big way, consider buying and renting out an entire apartment building
The strategy: Purchase and hold a vacation home or second home for many years with the goal of vacationing there, perhaps renting it out to others and retiring there, or selling the property when its market value has increased.
This type of real estate opportunity suits those with plenty of money and time to play. They aim to hit it big in the future rather than profit from month to month. This option scores with the baby boomers, according to the manager of real estate research for the National Association of REALTORS®. They have reached an age where they are thinking of retirement, and they like the idea of buying in a potential retirement market and renting out their property until they are ready to move in themselves.
In a slow real estate market, vacation homebuyers can make the most of their investment by getting a good deal on a property in a popular location and then selling it when the market is strong. But the owners may also live far from the property, making it harder to address any issues that arise. And since these properties often include personal use, they typically aren’t the pure investment transaction that the other properties are—the owners may want to vacation themselves, and may have less patience with the business of handling rental contracts, cleaning needs and security. A property management firm might be worth the expense if it saves some headache.
Deena Weinberg contributed to this article.
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