Did you know that in the second quarter of 2022, the sales price of houses sold in the U.S. averaged $525,000? That’s a staggering $150,500 more than the mean home selling price in the second quarter of 2020!
Despite those skyrocketing prices, real estate is still America’s favorite investment medium. In a 2022 survey, 29% of Americans picked real estate investing as their top choice. By contrast, only 26% of surveyed adults chose stocks.
Those stats should be enough to prompt you to learn about the best ways to invest in real estate.
Don’t worry, though, as that’s what we’ll discuss in this guide. Keep reading to discover the top real estate investments to choose from today.
The rental vacancy rate in the U.S. plummeted to 5.8% in 2021. That’s a record low since the mid-1980s.
That also shows how rental properties are becoming even more in demand. For the same reason, they’re some of the best real estate investments you should consider. In doing so, you can generate a relatively passive income through rent payments.
One of your options is to purchase a second home. Then, you can renovate it to make it move-in ready and rent it out long-term.
Alternatively, consider managing an AirBNB for short-term or vacation rentals. It’s a good idea to create an AirBNB digital guide to streamline every guest’s experience. Most importantly, be sure your property is free of defects; otherwise, you may get a lot of complaints.
Turnkey properties are also rental properties like single-family houses, duplexes, and apartment buildings. What’s unique to them is that they require little to no improvement. That’s because companies that sell them have already renovated them.
Moreover, most turnkey properties are usually fully-furnished and move-in ready. Therefore, when you buy one of these properties, you can rent them out immediately. Some even already come with a tenant, further simplifying things for you.
You also have the option to hire turnkey property management companies. These are often the same firms that buy and renovate the homes themselves.
Thus, turnkeys can be a great way to grow your real estate portfolio if you don’t have time to renovate a rental house. Likewise, they can be ideal options if you want rental income but don’t want to manage tenants.
However, you must prepare a heftier capital if you invest in turnkey homes. After all, someone else has already completed the renovations on your behalf. Thus, you have to pay extra for those, more, if you hire a property management firm.
In the first quarter of 2022, flipped houses accounted for nearly one in 10 U.S. home sales. That’s the highest since 2000, indicating that house flipping is now more in demand.
House flipping does involve more skills than buying and renting out rental properties. For instance, you must have experience evaluating, marketing, and renovating real estate properties. Moreover, you need significant capital to buy and improve each housing unit you want to flip.
Still, house flipping can be a rewarding experience for creatively-inclined investors. After all, you can renovate and redesign the properties based on what you believe suits them best.
Plus, the aging housing stock in the U.S. provides opportunities for flippers. So you know, over half of all single-family dwellings in the country have been around before the 1980s.
Real Estate Investment Trusts (REITs)
REITs are companies that own, operate, or fund income-producing real estate. These include offices, hotels, retail centers, apartment buildings, and warehouses, to name some.
REITs allow you to invest in those facilities without purchasing or owning them. And like stocks, you can buy and sell them on most stock exchanges.
To top it off, REITs are exchange-traded trusts, making them highly liquid. Thus, you don’t need to hire a real estate agent to help you cash out your investments. Since you don’t own the real estate property, you don’t need a title transfer, either.
What you do need, however, is a brokerage account. Fortunately, creating one is pretty straightforward and takes 15 minutes or less.
Invest in Your Own Home
Improving your home is one of the best ways to invest in real estate because, first, you need less capital. Second, you get to reap the benefits of the renovations you complete. Third, investing in your home increases your equity on it and its overall resale value.
You can start by making your home more energy efficient, which can help you reduce your energy bills by as much as 30%. That’s also why many home buyers favor energy-efficient homes over non-efficient ones. Moreover, energy-efficient houses have sold for 2.7% more on average than those that aren’t.
Some examples of energy-efficient investments include LED lighting and Energy Star-rated appliances.
If you have an older home, consider getting its plumbing system re-piped too. Likewise, have an aging electrical system inspected, re-wired, and, if feasible, upgraded. Finally, if you still have some budget left, get a new roof or, at the very least, install new insulation.
All those improvements can help boost your home’s resale value. However, if you’re not ready to sell, you can consider renting out an extra room in your house. A newly-renovated home is more likely to attract tenants than one in poor condition.
These Are the Best Ways to Invest in Real Estate
There you have it, your comprehensive guide on the best ways to invest in real estate. Now you know that some, like turnkeys and REITs, require little active participation. However, if you’d like to flex your creative muscles, go for house-flipping or renting out a second home.
Either way, all these real estate investment options let you generate extra income. So consider investing in one or more of them as early as now.
Are you looking for other financial guides like this? Check out our latest blog posts, then!