Real Estate Investments
A startup point to your investment
At some point in History, investment meant putting your money into long run ventures such as investing in shares, bonds or mutual funds. Nowadays, if you think about rentability in the long run, real estate investment has had tremendous growth and became a highly profitable route.
Real estate investment is one of the most popular attractive investment activities there are. It’s simple to invest in real estate, since there’s a promise of return. It’s also not very volatile, which reduces the risk associated with any kind of large investment.
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As a source of income or enhancement of your investment portfolio, real estate investment is much more safe and reliable. Once you purchase a property, there are numerous risks but also numerous ways to make that property profitable.
Once you invest in a property, you are making it more valuable. If the value appreciation of your property only increases with time, you will be able to sell it at a higher price than the purchase price you paid.
Routes of Real Estate investment
From a seasoned to an aspiring entrepreneur or investor, buying a property and making it profitable is their most important goal.
To an investor, any kind of investment is something very personal. In the sense that by investing their money in an idea or project, it’s not a small amount of their money. And it’s because they have a comfortable budget and margin to spend a significant amount on something, that their investment must be truly successful and profitable.
To become a successful investor in the real estate industry, you must first master the diverse routes of investment there are. For a real estate investor, the top 5 routes of investment to consider differ considerably from each other.
The most popular option is rental properties, which means obtaining a significant return and becoming the landlord of your property(ies). There’s also the option of flipping houses by purchasing, renovating and selling it afterwards. And then, on a more involved basis, there are real estate investment groups and trusts.
The route of investment you choose depends mostly on how hands-on you want to be with your investment. If a kind of silent partner or a very involved one.
Rental Properties
Today, by investing in real estate, you have a wide network of routes to choose from. The most popular is probably rentals, especially since the appearance of Airbnb’s and such platforms, that manage the scheduling of rentals on your property throughout the time you define for that.
Investing in properties to rent them out to foreigners, tourists or national residents is profitable, no matter the rental route you choose. Yes, because you can rent a property of yours by two ways:
- rent it by yourself;
- rent through a property management company.
If you choose to rent it yourself to others, the process starts and ends with you. You become the landlord, therefore accountable for the maintenance of the house and of scheduling the short term or long term rentals. Client management is a full time job, between the expectations and needs of each. And of course, any financial duties and taxes are under your wing.
If you choose to employ a property management company to rent your property for you all year round or for short seasons, then they will manage all the scheduling for you
Another key factor is the rental fee, what you charge per rental of your property depending on its location, the time frame of each rental and so on. Rental yields in Portugal vary depending on the region or city where you choose to buy your property.
A clever way to make the rent work to your advantage, without overcharging, is to put the rent above your expenses. That way, crossing your revenue and expenses, you will have a small margin of profit and you can cover what pains your finances more, at a quick pace.
House Flipping
This route became very popular over the years. One could say it became a trend, a very profitable one. Flipping houses consists of buying a property and selling it at a higher value, at a later date. Therefore, obtaining a good profit margin.
What’s not quite known, is that there are two very different types of flipping houses. The general opinion is that flipping a house means buying, renovating and selling a property afterwards. But there are actually two ways of flipping houses:
- Holding and reselling: a property is purchased with the goal of being renovated and updated, according to what will make a good sale; normally the renovations can take 3 to 4 months, at which time the goal is to sell the property way higher than the sum of the investment and renovations.
- By repairing and updating the property: consists of purchasing a property while the prices of the market are still rising, holding it for a period of time and sell it afterwards at a profit.
The investors who choose flipping houses as their way to increase their real estate portfolio, tend to be extremely active during the whole renovation process. They know how they want the house to be done, to be able to sell it with as much profit as possible.
Since there’s always a risk in real estate and in flipping houses in particular, being able to accompany the whole process actively and making decisions, helps balance the risk of selling the house without the intended profit.
Investment Groups(REIG’s)
This is one of the two options available for an investor looking for a hassle free, no involvement real estate investment. As an investor you put your funds on a property or set of properties, but the company or investment group are the ones managing it for you.
What does this mean specifically?
Imagine you partner with an investment group for a real estate investment. The company will purchase a property (house, estate, building, set of buildings, etc…), which an investor can buy. From that moment on, the company will manage all logistics related to the maintenance, advertisements, finding tenants and rent payment.
The trade off for taking all the hassle on their shoulders is a small percentage of the monthly fee that you as an investor will receive from said tenants.
Investment Trusts
By buying any kind of property highly rentable, investors search for regular income. That’s why these types of companies invest in non-residential real estate (office buildings or towers, malls, health facilities, etc)
As something immaterial and liquid, you can think of the purchase or sale of a real estate trust as alike to stocks or bonds. They can be bought and sold within a very short period of time.
Some say that investing in real estate is the closest thing to the proverbial pot of gold. And it’s true. As long as it’s done right, you can multiply your earnings without limitations.
As said by Robert Kiyosaki, famous author and businessman:
Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth
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