Real estate investment is easy and difficult at the same time. If you don’t get the hang of it, no matter how much you invest, you won’t be able to ensure a good retirement.
But once you start strategizing with market facts and data and start investing in the right assets, you will see yourself in a good position later down the road.
So, what are those “right assets”?
1. Residential Rentals
For new investors, residential properties are the starting point for them.
At first, you should start small. Invest in small single-family houses, duplexes, triplexes, etc. Once you successfully invested in a few of them, you can now aim for small multi-family buildings that are between five to fifty units.
But remember to invest in class C/B type properties, they have a higher rate demand than D class or C- properties, and also, attract better tenants.
2. Commercial Rentals
This type of assets is exclusive to real estate investors who have some experience with residential assets and managed to keep some financial reserves in order to dive into commercial rental properties.
These types of properties are mostly office towers, warehouses, cars washes, skyscrapers, strip malls, storage units, and some smaller storefronts.
To diversify your cash flow, you can also build up an office tower and rent or leases companies the floors for their office space. But keep in mind that these commercial buildings will have special management and safety requirements. So plan for that.
Some tips on commercial buildings, always try to sign multi-year leases. This will allow you to get stable cash flows and also ensure you can outlast any decline in rent. On the flip side, if your market is very competitive and the rent is ever increasing, you may have to stick with your old agreements and low rent for years.
3. Mortgage Notes
Usually, one thing that each real estate investor would concur with is the time and exertion required to oversee rental properties. However, if you have constrained time or a lot of experience in real estate, investing in performing mortgage notes is certainly a decent choice. As the rental properties, mortgage notes also ensure a steady cash flow without any hassle or managing issue. These mortgage notes are widely available through the banks, brokers, and loan sales platforms.
While buying a mortgage note, you should consider the risk profile of the notes, all the assets backing the notes, and of course, the borrower’s profile. Before buying the notes, try discovering the assets of the notes and ensure that they are well-maintained or have higher resale values. While checking the borrower’s profile, focus on his FICO score and his debt-to-income proportion.
4. ETFs/REITs/Real Estate Mutual Funds
If you are stuck with limited resources and time but at the same time have plans to put real estate into your portfolio and retire rich, some passive real estate ventures could work for you. A portion of the best aberrant real estate ventures includes real estate shared funds, real estate speculation trusts (REITs), and exchange-traded funds concentrated on the real estate industry.