There are several reasons why investing in real estate is a smart financial decision. For starters, real estate tends to appreciate over time. It also has the ability to provide stable monthly income, offers incredible tax advantages, and acts as a hedge against stock market volatility.
Investing in property can get pricey, however, and the capital you earn won’t be liquid. Moreover, you might be required to personally guarantee large quantities of debt and likely not see returns for a long time.
Although it can take years for property investments to compound, your portfolio will begin to generate significant cash flow once they do. Any profits you make can be reinvested, and then you will see your wealth start to snowball.
If you want to know how to get started in real estate investing, then read on for a comprehensive guide on the different types of real estate investments and how you can choose the right investment path for your goals.
There are two primary ways people invest in real estate — active investments and passive investments.
Active investments require a hands-on approach to real estate and will require continuous work to generate returns. Either by acting as a landlord or hiring a property manager, you would be involved in the day-to-day maintenance and upkeep of the property.
Passive investments, on the other hand, only require you to provide capital. This is a good option if you do not want to get your hands dirty and would like the flexibility of more liquidity than active investments. But note, passive investments usually offer lower returns.
Regardless of whether you are actively or passively investing, make sure you understand the market’s state before diving in.