What is the best way to invest in real estate? This is a common question I hear both as a broker and investor. Well, the answer isn’t so simple. And as most difficult questions, the response begins with a question of my own: what are you trying to achieve?
A fast return? A high return on your money? Passive income? A safe investment?
– Highest and fastest returns: house flips. Speaking in general terms, this will usually generate the best bang for the buck, but also involves higher risk. Good flips are generally done all cash and therefore they require a high amount of capital. There are many uncertainties with house flips, but the free market always rewards people willing to take risk. Real estate is usually a slow-moving investment mechanism, but with house flips one could make a great return in a short period of time. This is the greatest benefit of flipping houses. An experienced house flipper could take advantage of smaller profit margins because they do larger volume.
– Best passive income: multi-family investments. Any landlord will tell you, this is only true if you use a management company. Otherwise, multi-family investments aren’t so ‘passive’. This, again, is a generalization, and depends on other market factors, but economies of scale allow multi-family investors to hire professional management while still leaving room for profit. T
– Safe Investment: single family residential investments. Both as a personal residence, and as a rental, single family residences are generally considered to be good and safe investments. In a strong rental market like we are experiencing today, single family homes can even yield a good return on the investment. Given the low interest rates we are seeing, buy a home, find a tenant, and forget about it. 30 years from now, you will look back and realize it was one of the best investment decisions you’ve made.