If you are a young professional aspiring to be wealthy and
looking for extra income opportunities, then you have probably
checked out the real estate market. Many are making a fortune
through real estate by cashing in on their investment property.
At this point in your career, you have two real options you
should consider. You could buy an investment property and hope
to cash in on the property in the future, or you could look for
an income property that will offer profitable cash flow from
month to month. Let's take a look at the advantages and
disadvantages of investment properties and income properties.
Income
Property
The methodology behind investing in an income property is
focused around making money now. Not everybody can invest money
in real estate and hope for a huge return 15 or 20 years down
the road. For investors that don't have a big stash of cash
laying around waiting 15 or 20 years for a return on their
investment is not a viable business plan.
Thus, as you might expect, an income property is a property that
returns positive net income from month to month. For example,
the typical income property for small real estate investors is a
single family dwelling. Suppose a person much like yourself
decides to invest in house that is being sold at or below market
value. The business plan is to make minimal investments fixing
up the house, and then rent out the house to somebody with sub
par credit that can't get a loan for their own house. To
initially pay for the house a mortgage loan is taken out. The
monthly mortgage loan payments are calculated to be $850 and you
plan on renting out the house for $1100 since there is a
shortage of rental homes in the area. Right off the bat you have
a gross operating margin of $250 on this income property. Of
course there will always be other expenses, such as maintenance
and taxes, which you must pay. However, these additional
expenses will still leave a nice little cash flow of profits for
your efforts. Bigger investors follow this methodology and buy
an income property like an apartment building and will make
larger profits thanks to economies of scale.
Investment Property
The methodology behind an investment property is a bit
different. Rather than focusing on current profitability like an
income property investor, an investment property investor
focuses on the big picture. The investor will buy an investment
property which allows him to at least break even or perhaps make
a small profit from month to month. However, his primary
interest is holding onto the property for the long term and
selling the property when the market value has risen
significantly. Over a span of 15 to 20 years, it is not
unreasonable to expect investment properties in hot real estate
markets to double or even triple. Thus, the typical >
investment
propert investor has two resources. He has lots of
money on hand as well as time to play the waiting game.
The investment property investor is not terribly interested in
making money on his investment right now. That is not to say he
is willing to lose money on the property from month to month,
but he is willing to operate at much lower profit margins than
your typical income property investor. The real objective of the
investment property investor is to strike it rich down the road
when he finally decides to the sell the investment property.
Both of these investment strategies serve as viable business
plans. What suits you best will depend on your needs as well as
your resources. If you have lots of money and time then an
investment property could be way the go, but if you need to make
money now an income property might be your best choice.
Adam Smith is an informational author for 10X Marketing.com To
learn about making a positive
cash flow from investing in Real Estate, visit
SNCLoans.com
About the author:
None
