Real estate investing is a proven strategy to help grow your wealth and provide extra income now and in the future. Knowing where to start can be the hardest part if you’re looking to diversify your portfolio of real estate investments, especially in a big city like Seattle. We’re here to help you understand a little more about what real estate investing is and some strategies that can help you find success.
What is Real Estate Investing?
Real estate investing is the purchasing of property or structures with the intent of owning, leasing, or selling it for a profit. Pretty simple, right? This can include buying a home and planning to lease it out. It could also be investing in the newest commercial building or office space that is going in down the road.
Real Estate Investing for Rentals
Buying a residential property with the intent to lease it out is the most direct way of investing in real estate. We also believe it’s the best way to diversify your assets while also increasing your wealth and monthly income.
There are a few main reasons why someone would be interested in purchasing a rental property: to flip it (renovate) and sell the home within a year or two for a profit; to find a long-term tenant that is willing to sign a contract to live in the home for at least a year; or list the property on popular websites such as Airbnb or VRBO to have people rent out the house for short-term periods.
Depending on your situation, you might want to own a property nearby (such as Bellevue or Redmond) that you can easily manage yourself, or you might want something in a destination location to use as an Airbnb or VRBO. Either way, owning a rental property comes down to managing cash flow and keeping consistent tenants in the building.
You’ll want to find a real estate agent that specializes in investment properties (like us!) to help you find the perfect property for you. Once you find the right property, you’ll need to make the down payment, get an inspection done, and do the math to make sure your return numbers will turn a profit.
Active v. Passive Real Estate Investing
There are two main strategies when it comes to real estate investing: passive and active. Active investing means that you have hands-on projects related to the property that you are working on or managing at most times. An active investor is involved in most day-to-day activities regarding the property. Passive investing means that you aren’t as involved with the operations of the property. Instead, you put your money into a group investing strategy (such as a real estate investment trust, or REIT) and someone else handles the everyday tasks that come with the property. In this case, you earn income when the fund eventually pays out.
Steps to Take to Become a Real Estate Investor
- Determine how much time and money you want to spend on an investment. This will answer a lot of the questions that will follow.
- Set the right investment budget. Talk with an advisor about what would be safe and smart to put into a real estate investment.
- Do the math. Make sure that what you’re investing in has real value and will continue to grow in value the longer you own it. Figure out your expenses and how much monthly income you’re needing to cover them.
- Do your research and decide what’s best for you. Do you want to own a rental home on your own? Talk to an agent. Want to invest in a REIT? There are options for that as well.
- Expect setbacks and difficulties along the way. No investment is risk-free and more active investors will have to deal with setbacks as they move forward.
If you’re considering buying a rental property in Seattle, now could be a great time. The market is cooling and homes aren’t lasting as long on the market. If you have any questions about real estate investing or finding the perfect property to buy, reach out to us at info@realestategals.com or give us a call at 206-339-9677!
If you’re interested in real estate investing, knowing where to start can sometimes be half the battle. You probably already know that investing in property can not only be a safe and solid long-term investment, but it can also be a source of extra income in the near term. With the real estate market cooling down after a couple of hot years, now could be a great time to dive.
