Since the real estate market is so diverse, it is hard to make a decision on which investment strategy to go with. When you make your real estate investment decision, you should keep in mind that there are short term and long term investment strategies to go with. Here we are going to introduce you to the best long term investments in the real estate market.
Though there are many lucrative real estate investment strategies out there, you are the one to decide which one is the best for you. It is important for you to know that short term investments can be as lucrative as long term investments. However, we are going to view two of the best long term investments in the US real estate market for you, especially if you are just starting in the real estate business: the buy and hold strategy and the passive investment.
Related: What Are the Best Real Estate Investment Strategies Right Now?
Best long term investments: Buy and holds
It is, in fact, what it sounds like. You, as a real estate investor, buy an investment property and hold it for a while in order to sell it at a much later date. Of course, you are doing this for financial benefits. The important thing about buy and holds is to make sure that the housing market will improve. This is crucial as your main aim is to make a profit out of selling your investment property. So, here are some of the benefits of buy and holds:
- It is a very safe investment: Buying and holding real estate properties is one of the best long term investments in the real estate market. It is very safe, especially if you decide to invest in residential properties. There is always demand for housing due to the rapid population growth in the US. You buy it, and you will always find a buyer when you decide to sell it.
- You can actually benefit from it while you are holding it. For example, if you decide to buy a house and hold it for a while and then sell it at a later date, you can still have a good positive cash flow. Let us say that you purchased a house, and you are going to hold it until it appreciates in value. You can rent it out in the mean time and get a monthly rent on it. This will keep a positive cash flow for you and will help you pay off the mortgage loan. This is, of course, if you have funded your investment with a bank loan.
- Appreciation: The real estate appreciation rate is what makes buy and holds one of the best long term investments in the US real estate market. Moreover, the longer you hold the property, the more it appreciates, taking into consideration that the average appreciation rate per year has been 6% over the last fifty years. The thing about buy and holds is though that it takes time to make a profit. Thus, you can go with other investment strategies such as real estate wholesaling, but you will have to give up the long term appreciation and the monthly cash flow on your investment property.
Related: How to Buy and Hold Real Estate Property?
Best long term investments: Passive investment
You might be wondering what passive real estate investing is. And what the advantages of it are.
Passive real estate investing is when you invest your money in real estate investment trusts (REITs) or lax liens. It does not require any management efforts or even any contribution on your side. Moreover, there is no direct ownership of the property itself.
So, here are some of the advantages that make passive real estate investing one of the best long term investments in real estate:
- Steady income: This is one of the best aspects of passive real estate investing. It is ideal for those who are seeking a steady income, be it retirees or even people who want to make extra income on the side. It does not require much interference or management on their side as everything is managed by the real estate trust corporation.
- It saves time: When you actively invest in real estate, you have to make sure that your property is well managed. However, in passive real estate investing, you do not have to get involved directly with the property. This will let you invest your time in another job, or even lay back and relax while you are receiving an income.
- Passive real estate investing is cheaper: Yet another aspect that makes passive real estate investment one of the best long term investments is that it does not cost much. It saves you money on the investment itself and saves you even more on property taxes as well.
- Appreciation: In passive real estate investing, your property is more likely to keep appreciating in value while you sit back and watch.
Related: What is REIT and Is It a Good Idea to Invest in One?
Other best long term investments: Traditional and Airbnb rentals
- Traditional rentals: Traditional rentals are when you rent out your investment property on a lease agreement. This agreement’s duration is usually twelve months in the US, which means you let tenants in and get paid by the end of each month. There are so many advantages that lay in this kind of investment. First, you have a steady rental income which leads to a positive cash flow. You do not get to worry when or how much you are getting paid. Second, you do not have to visit your rental property so much once you let tenants in. You are only expected to visit if a problem occurs and you are the one to take care of it. Third, though your property is subject to taxes, it is subject to tax deductions as well.
- Short-term rentals (Airbnb rentals): Airbnb is a website which provides a wide platform for those who are willing to share their living space with travelers, who are usually looking for a cheaper place to stay. You can buy an investment property and set it in a way to let tenants in for shorter periods, or you can even list a room at your house. There are so many reasons why Airbnb rentals are one of the best long term investments. For instance, when you list your room on Airbnb, you get to choose your guests based on a rating system. In this way you will make sure that your space is in good hands. Another thing is that you do not have to deal with rental arrears. You get paid in advance or on the day your guests check in. You also get to make extra money on your property. On Airbnb, you can list your property or space for a price that is set by you. You get to play with the price however you want.
After viewing a few of the best long term investments in the US real estate market, these in fact emerge as very lucrative, especially if they are well thought through and planned. So, after choosing which way to go with real estate investing, it all depends on you to make it the best and most rewarding experience.
Meanwhile, to get even more knowledge on and better understanding of real estate investing in the US housing market, keep reading on Mashvisor.