Deciding where to invest 100k can feel quite overwhelming. The sheer number of available options can leave you confused and unable to pull the trigger on one particular venture. Still, identifying investments that yield a decent return on investment is not difficult. In fact, one such type of investment is rather simple and straightforward. We’re talking of course about investing in real estate. In this article, we will discuss why real estate is the best way to invest 100k and outline the investment strategies that can help you build wealth in an effective manner.
The Benefits of Investing in Real Estate
The benefits of real estate investing are numerous. Besides the relatively low risk that is associated with it, investing in real estate offers flexibility and allows you to build your portfolio through various strategies. Here is a brief look at some of the advantages that you can expect from buying an investment property:
It Can Create a Passive Income Stream
Few investments can match the level of passive income that rental properties can generate. Simply hire a property manager. You can also choose to invest in REITs or real estate crowdfunding.
It Is an Effective Way to Hedge Against Inflation
Investing in real estate is one of the most effective ways to hedge against inflation. In fact, real estate investors can stand to profit from it both in the short and long run. This is due to the fact that inflation is invariably followed by an increase in rental rates. This will result in a significant boost to the investor’s cash flow.
It Is Easy to Finance
Compared to other types of investments, buying a rental property does not require a large amount of money out-of-pocket. It is not unusual for real estate investors to borrow up to 90% of the acquisition cost at decent rates. This immense leverage enables investors to maximize their returns. Other assets, on the other hand, don’t offer the same leverage when used as collateral.
It Grants You More Control Over Your Investment
Unlike stocks or currencies, real estate investing is not beholden to the whims of company CEOs and Wall Street executives. You can be solely responsible for the success or failure of the venture if you choose to be. You are also free to choose whichever strategy to achieve the desired results.
The Best Way to Invest 100k in Real Estate
There are several factors that make real estate the best investment for 100k. One of the main selling points is the multifaceted nature of the sector. As a matter of fact, there are no less than 20 different investment strategies that you can choose from. Each one varies in terms of the level of risk, payment structure, and type of management that they require. Having said that, it’s essential to note that all of them can be profitable if you cover all your bases and carry out a thorough investment property analysis. The Mashvisor investment property calculator can facilitate this process for you. You can click here to learn more about it. But first, let’s take a closer look at how to invest 100k in real estate.
Using the Full Amount to Buy a Single Property
This is probably the best way to invest 100k safely. Buying a single home without any debt gives you valuable equity that you can borrow against in the future. Furthermore, managing one property won’t take up a lot of time which allows you to pursue other ventures.
This strategy does have some drawbacks though, especially if you’re investing for income. The cash flow that a single property generates is fairly low. Moreover, losing a tenant will result in a 100% vacancy rate and will bring your rental income down to $0.
Investing in Multiple Rental Properties
This strategy requires using 100k as a down payment for multiple properties and taking on mortgages to finance the rest. There are several advantages to this approach. Namely the ability to generate higher rental income and maintain a decent occupancy rate after losing a tenant. You will also be able to deduct loan costs and mortgage interest from your taxes.
The main disadvantage of buying multiple rental properties is the fact that managing them all can get very hectic. Dealing with multiple tenants requires quite a bit of effort. Moreover, having multiple mortgages over your head can become stressful over time.
Using the 100k as a Down Payment for a Small Apartment Building
This is the best way to invest 100k for income. A multiple-unit apartment building provides the highest income potential of all three options. In addition, the property management costs of this type of building tend to be lower than that of houses. Furthermore, having all tenants in a single building makes managing everything easier. The only disadvantage of this strategy is the high level of asset management skills that it requires. Staying on top of things and resolving the issues that are bound to occur in the building is not something novice investors can handle.
Before committing to any particular strategy, it is essential that you identify your needs first. You also need to do an honest assessment of your level of experience and pick the strategy that suits it.
Understanding Investment Property Mortgage Lenders
As you can see, some of the best ways to invest 100k in real estate involve getting a loan. But before getting a loan, it’s essential that you familiarize yourself with different mortgage lending options. This is the only way to ensure that you are getting the best loan product for your venture. Here are some of the options that are available to you:
- Retail Banks: These financial institutions vary widely in terms of size and capitalization. Retail banks underwrite their own loans and are generally quite flexible when it comes to loan approval.
- Credit Unions: These are customer-owned cooperatives that boast a not-for-profit tax status. This allows them to offer lower fees to their members. The only drawback of getting a loan at a credit union is the small number of branches.
- Mortgage Brokers: This option is ideal for beginner real estate investors. Mortgage brokers are intermediaries that scan the market for the best loan rates and terms. They take the guesswork out of finding a lender and are guaranteed to match you with the right loan product.
Regardless of which investment strategy you choose, real estate remains the best way to invest 100k. Take the time to learn everything there is to know about the market and start looking for investment properties in your area.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.