An investment property is a real estate property that an investor purchases for the sole purpose of earning a return on it. This is done through rental income, the future resale of the property, or both. There are two types of real estate investments: long term and short term investment options. Leaving an investment property to appreciate in value is considered a long term investment. Long term investments offer stability and assurance. Short term investment options, on the other hand, offer real estate investors the ability to make cash quickly.
Short term investment options are becoming increasingly popular in the US housing market. Today, making cash quickly in real estate investing has become anything but an anomaly. This is especially true given the emergence of various real estate investing methods, such as lease-to-own, fix-and-flip, and Airbnb rentals. These real estate investment methods, that we will further explore, haven’t only enabled those needy-of-cash to invest but also those with little money. Millennials consequently have come to constitute a larger share of the real estate investment business.
Below, we propose to you the top short term investment options. Although only emerged recently, these methods are becoming more desirable and preferred by an increasing portion of the population. Read each and every option carefully, pick your destination, and investigate further.
Airbnb has become one of the most popular short term investment options today. Only emerged recently, Airbnb has now become a top residential real estate investing method. Airbnb, a peer-to-peer short-term rental service, is an online marketplace that brings together renters and landlords. Tourists and travelers usually make up the renters pool. They not only seek Airbnb for affordable accommodation, but also for the hospitable and homey experience that this method provides. Landlords, in turn, get to enjoy the company and culture of others, while making money to pay off mortgage, may they decide to rent parts of the house.
Additionally, if a homeowner is traveling out of town and would like to keep his/her real estate property alive, while making money, renting out on Airbnb seems like a profitable option. Need you not to worry about managing the renting of the property, today many third party platforms have come to provide their professional property management services at competitive prices. Do not, however, overlook the local regulations associated with Airbnb.
It is important to note and further look into regulations governing rentals for less than 30 days. Some states, in fact, have been making it stricter and harder for short-term Airbnb landlords. Prior to your investment in Airbnb, clearly understand Airbnb’s policy and hosting standards for listing a property, communicating with guests, maintaining the space, and providing necessary amenities.
Lease-to-own option is a combination of both short and long term investment. A seller rents out a property while enjoying the possibility of selling it at the end of the lease. This means that more renters and contracts will come flowing in. When you have a bigger pool of renters and contracts, you get to enjoy the ability to set prices higher. It is among the short term investment options, because instead of waiting for the property and the land on which it is built to appreciate, you can rent it in the meantime and make more bucks before you sell.
The seller, while earning a monthly rental income, is comforted to know the house has a potential buyer. However, if a buyer turns down a deal before the lease ends, a seller gets to keep the option money. The option money is about 2-6% of the home value. Moreover, the real estate investor keeps the 25% that the buyer paid in monthly rental that would’ve otherwise gone to the final purchase if purchased. Generally, in a lease option, the real estate investor earns monthly earnings, while knowing that the home would sell in some years time. If you’re keen on residential real estate investing and building equity, we recommend that you consider lease option.
There are two ways that a real estate investor can purchase a residential property. An investor can either choose to buy and hold onto a real estate property, or buy, fix, and flip the property quickly. The fix-and-flip real estate investment strategy is of the popular short term investment options where the buyer purchases a real estate property through a fix-and-flip loan. The buyer then renovates the property, and then sells it for a profit. Fix-and-flip real estate investors generally aim to sell the property within 6 to 12 months of the renovations. Although data has showed that over 40% of all fix-and-flip homes sell at either break even or a loss, you can expect to generate big gains if you plan accordingly. Real estate agents recommend that a home flipper sells the property 30% higher than the initial purchase price, to make profit. This takes into account the repairs and renovations assessed.
To effectively sell the property and make profit, we recommend that you conduct home inspection prior to your purchase. A home inspector will assess the condition of the house and advise whether or not the renovations to be made will be worthwhile. If the investment project comes out to be feasible, and you decide to proceed with it, we advise that you plan meticulously and in advance. As you formulate your investment plan, make sure to take into account costs and fees, types of renovations, and laws and regulations associated with this. For the success of the project, enumerating and estimating costs and chores associated with renovations becomes necessary. It is important to understand local rules and regulations regarding the fix-and-flip strategy and review all potential tax breaks.
Many investment methods, whether long or short term investment options, have recently emerged and come to dominate the real estate market. Short term investment options are becoming more popular, especially for amateur real estate investors, including millennials who are just entering the real estate market. If you do not have a lot of cash in hand, we recommend looking into becoming an Airbnb landlord. While if you have some cash or are able to take out a loan, the fix-and-flip strategy becomes a more plausible option.
For more information about short term investment options, visit Mashvisor.