A Glance at residential real estate
Last time, we discussed the pros and cons of investing in real estate and some of the reasons that make real estate such a popular asset class. If you’re just getting started with real estate, it can be a little overwhelming to choose an appropriate investment among all the available options.
When you think of real estate investing, buying a residential investment property and renting it out might be the first thing you think of – and while that is a viable option, it’s just a drop in the ocean in terms of all the real estate investment choices at your disposal. Let’s explore a few of the available options.
Residential real estate is probably the most widely known and well-understood type of real estate investment. Residential real estate investments are usually active to semi-active, meaning they will likely require significant monetary and labor contributions – but they have the potential to bring in sizable profits and steady cash flow.
A long-term rental property can be a single-family residence or a multifamily home that you buy with the intention to rent it out for the long term such as an annual lease. As an investor, you make money through rental income and/or through appreciated property value if you eventually decide to sell it.
Vacation or short-term rental investments typically involve buying a property in popular destinations such as vacation spots, college towns, and seasonal areas and renting it out to visitors for short periods of time. This can be one of the more operationally intensive residential real estate investments because you, a partner or an employee will have to manage the upkeep of the property between guests or tenants.
Some of the benefits of investing in residential real estate include –
1. A steady stream of rental income, especially in areas with appropriate levels of demand.
2. Property values appreciate over time. This is especially true in inflationary periods and in areas with high population growth.
3. Financing is available up to 95% of the purchase price for primary residence and up to 80% for investment properties, depending on the creditworthiness of the investor.