It may seem like a strange time to consider investing. With the world still suffering the effects of a pandemic and experts predicting one of the most challenging recessions of our time. However, one type of investment can be very lucrative during the downturn. If you are willing to put your money in and wait for the economy to settle.
Real estate investment has many different forms, one size doesn’t fit all, and you should think long and hard before considering placing your hard-earned savings into an asset. You also need to consider protecting yourself legally before heading out and buying property.
Setting yourself up as a legal entity and purchasing your property under that company will ensure your personal assets aren’t affected should you run into any legal issues. Asset separation is one of the smartest things a real estate investor can do, and some people even buy each property under a different LLC. Of course, this comes with a lot of paperwork so sit down and consider your best options.
Financing your investment the right way is crucial. It may be better for you to do this through a lender so you can access your savings should you need them. If you are looking for a way to get started as a real estate investor, these resources will be useful.
There are many different categories of real estate investment. Residential tends to focus on you buying a property to lease, and this gives you cash flow guaranteed for a twelve-month lease. It can be particularly smart during a recession as your property pays for itself before the downturn ends and prices start to rise. At which point, you may want to liquidate and cash in your investment.
Commercial real estate usually sees small businesses renting your property on multi-year leases, which is even better for cash flow, in a recession this can be a slightly riskier strategy as if the business folds, you may be left with an empty building. So it’s essential to have the business knowledge and know who is leasing your property.
Wholesale real estate involves a lower investment but also comes with a lower return on investment. This suits those who want to see a quick flip in properties. You agree to a contract with the seller for less than the market price, then sell on to a real estate investor for more money. The profit is yours.
You could also consider becoming part of a real estate investment trust (REIT). This is where you buy shares in a corporation that owns properties, the income and dividends are yours. This allows you to remove the element of dealing with the property yourself although it can throw up issues with your tax as you will be paying a higher rate which could push you over the threshold at the end of the financial year.
Looking into real estate investment now, as the market begins to lose momentum could be the best time to build your first portfolio of properties. Make sure you speak to an independent financial advisor before you start your journey!