Real estate can be a very lucrative business if done correctly. The real estate industry can be pretty risky at times, given the nature of the market. The key things to remember are to have a plan of action and to stay educated in the business. This includes knowing the market and understanding the risks that come with it. The simplest way to get a basic understanding of the real estate market is to rent your own property (if feasible) and go from there.
Renting Your Property
Own some property? You can rent it to travelers on rental services like Airbnb. If you travel a lot, whether for work or for pleasure, or even if you visit family and friends often, this is a very practical option for you to make some extra money on the side. This can even be a way to earn passive income. When listing your property, the main thing to remember is to be honest about the details of your space and to list it at a fair and reasonable price.
According to Airbnb’s official website, you can make nearly $2,000 a month by hosting travelers in your home or space. You have the option to rent a space, a shared room, or the entire house. The bare minimum needed to be a host is to have a space for sleeping and access to a bathroom. Cleanliness, essential amenities, and good communication are also important for receiving good ratings, which makes your space more likely to be rented out again.
Investing in Rental Properties
Once you’ve made some passive income on your first rental, you can invest in an actual vacation rental and other rental properties to generate even more income. Of course, with any kind of real estate, there is some risk involved. One of the main things to keep in mind is to research the area in which you will be buying the property or properties. You’ll want to invest in an area that sees a good number of tourists or has something unique to offer. Also, keep in mind that some places don’t allow short-term rentals (less than six months).
As the owner of a rental property, you’ll be considered the “landlord”. That means that the upkeep of the property is your responsibility. Also if anything breaks down, it will be your responsibility to see that it is repaired. You will also want to make sure that your property is a desirable place to live, even if it’s just a short-term rental.
Unfortunately, there are some downsides to rental properties. Income isn’t always guaranteed, especially when it comes to vacation rentals. That’s why it’s important to choose a location that will attract many tourists year-round. This can mean that you’ll need to invest in a rental property that’s not close to your current location, which can make the property harder to manage without help.
Investing in Commercial Properties
Because investing in rental properties may not always guarantee an immediate return, it’s always a good idea to diversify your real estate investment portfolio. A diverse investment portfolio reduces risk and gives you a better opportunity of making more money. If you have seen profitable returns from renting your own property and/or from your rental property, then you can take it up a notch in the real estate market and invest in commercial property. This includes properties such as multi-family homes, land, businesses, and even hotels.
Investing in buildings such as retail malls and office buildings is usually the least risky commercial investment. These types of properties require longer leases than apartments and almost always have lower vacancy rates. These properties tend to cost more, but if you’re looking for this type of investment venture, there are loans available for commercial properties.
Investing in real estate has great potential to turn a profit, if done correctly and if the work is put in. This does require time and money, but many people have been able to make extensive passive income from this type of investment.
*Photos by Curtis Adams