Real estate investing may be a lot of things, but it isn’t easy. At least that’s what a lot of people think.
Investing for short-term appreciation isn’t a good idea these days. If you buy property and hope for quick gains, you’re likely to be disappointed.
As far as long-term appreciation goes, you can buy a property, looking to purchase one at a price that allows you to pay management fees. Otherwise, you can manage the property yourself. But what about the tenants?
Commercial real estate is risky too, depending on the local market. So you are thinking about residential real estate. Managing it yourself may mean you are doing a lot of maintenance. And how do you find the right tenant? How do you create a lease? What you want is a stable situation with a tenant who stays a long time and keeps up the property. How do you get there?
A real-estate investment trust (REIT) is the real hands-free alternative. You simply purchase shares in a publicly traded fund that owns property, often commercial property, and possibly mortgages. When the stock market goes up, these funds tend to go down, and vice versa. This helps balance your holdings.
But the fund fees can siphon off your profits. What if you want a simple, low-risk long-term investment ? One where you can file the deed in your safe deposit box?
What do you think of the idea of investing your money in a single-family house, to be rented out? You can choose the house from a variety of local sunbelt markets, and you can take advantage of negotiated relationships with property managers, insurers, and mortgage originators. All this at just five to 10 percent down on each house.
A system like this will give you a predictable set of expenses and income. In fact, your tenants will pay off the mortgage for you. You can start a college fund for your kid this way–you can sell the house in 15 to 20 years, and take out your equity.
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