What is a real estate investment?
The most basic form of real estate investment is the purchase of your primary residence. Owning your own home creates equity which in turn could be used as leverage to purchase another property. Real estate investments can be made by purchasing any form of real estate; residential homes, vacant land, recreational properties, waterfront properties, and even commercial. The purpose of an investment is to be sold for profit at a later date.
How can I finance a real estate investment?
There are many ways to buy real estate investments. First and foremost, CASH! However, there are other ways to secure financing: using your 401K savings, receiving a home equity loan, land contract, and once you become a more seasoned investor commercial loan or 1031 Starker Exchange.
How do I know what type of investment I should have?
Assess your lifestyle. If you have a full time job, family, and barely get to go on vacations, passive investments may be more your style. If you are extremely handy, know construction, and have time to devote to building your investments hands on, the active investing is probably for you.
Take our QUIZ: “What Type of Investor am I?” to find out.
What is the difference between Active and Passive investments?
Active and passive are terms that refer to the level of involvement you want to have with your investment. Passive investments use the buy it and hold strategy. An example of this would be buying your primary residence, maintaining and improving the property over the years, and then selling it for a profit. Another example is purchasing vacant land and holding it as an investment, subdivide and sell smaller portions, develop it, or keep it whole and sell at a premium when land is running short. One more example of a passive investment is owning rental units but you hire a management company to keep up with the maintenance and renting the units.
Active investments are investments that you manage yourself and seek immediate returns. They require constant attention and savvy real estate market reading skills. An example of an active investment is buying a home with the purpose of remodeling or adding value and then putting the home back on the market at a higher price to sell for a profit. Another example would be managing your own rental units by doing all the maintenance and renting the units yourself. One more example of an active investment is renting out your units on your own short term through online sites like AirBnB or VRBO.