Every investor understands the value of a diversified portfolio. You simply cannot put all of your eggs into one basket. In terms of real estate this is especially the case. Ever since 2008, the U.S. real estate market has slowly recovered from a destructive loss of value undergone from the vast recession.
Many people went into panic mode and this was devastating to most homeowners, but regardless of how the market is at the time people will always need a place to call home and that is where real estate investors come in.
A real estate investor can expect to make a profit in a short interval of time from buying housing & renting it out regardless of how the market is. This is because they are buying and holding and not selling during a market bubble. If there happens to be a market bubble during this time period real estate investors are still receiving income from their tenants. When the bubble is over and a market recovery is in place, depending on where things stand and how much equity the investor has built up at the time the properties can be sold, refinanced, or the investor can continue renting and making a profit. Either scenario has a good outcome for the savvy real estate investor.
In the real estate industry a real estate investor has a variety of property types to choose from to diversify their portfolio such as offices, apartments, multifamily single family etc. As of now at Elite Investments our strategy is mostly buying and holding residential real estate and renting it out for a profit.
When most people think of residential real estate they think of only one individual house, however, residential real estate can be considered one individual house, a townhouse, a duplex, a triplex, or a quadruplex. A property with 5 units on up is considered to be a commercial property .
In this article, we will describe some of the Residential Rental Investment Strategies in detail and show why residential real estate is a good investment.
Before spending any money or spending any time investing in a residential real estate investment rental property, one should fully understand what property choices meet needs or requirements to achieve your investment goals. Strategies may vary depending on your employment status, liquid capital, income, and credit rating.
Some of the effective strategies are as follows:
If your desired outcome from real estate investing is to make a lot of profit from rental income, then you should look at properties with a high-net yield. Once you have established properties with a high-net yield your strategy should then be to keep the maintenance cost, repairs, insurance, etc.to a minimum so that these costs don’t eat into your profits
When it comes to long term buy and hold residential investment property, an investor should consider the projected appreciation rates. Keep in mind that the appreciation rate is not a definitive number and gives the estimated worth of the property after a few years. Other factors that should be considered are quality of the local schools, projected job growth, and age of the property.
Higher rent payments:
Residential real estate investment properties deliver positive cash-flow and generate an excellent return on your investment. These properties are usually less expensive than a commercial properties. In this type of investment, there is more eligibility for more favorable financing.
Another big advantage of residential real estate investment properties is fewer expenses . Especially on utilities. Also due to the smaller sizes of 4 units or less there is not very much of a common area space to maintain and a real estate investor will able to save on the maintenance costs easily.
Residential real estate investment properties also generally appreciate in value faster and cost relatively less than commercial real estate investments. Also, the overall investment less risky because you aren’t spending as much money. The mortgage rate will be covered easily with the monthly payments of tenants and is more manageable.
Less tenants to manage:
With residential real estate properties, you will have to deal with only a few families or simply one person. It will enable you to deal with a single personality easily without any complaints and squabbles between people. There is the option of hiring a property manager however, with so few tenants you have to out weigh the cost vs the benefit
In conclusion , diversifying your portfolio with residential real estate is definitely ideal with all of the time and cost saving opportunities that are given by residential real estate investments. A solid Residential Rental Investment strategy can bring in income for years to come especially when all aspects of each and every deal are effectively managed throughout the entire process.