The Basics of Investing in Real Estate in Coastal Virginia
Osprey Property Management | June 2021
Not so long ago, investing in real estate was a complex and expensive process. Thankfully, times have changed! You can now invest in real estate with minimal cash outlay (in some cases) and little to no prior knowledge of the industry! In this blog post, our Coastal Virginia property management experts share some great tips for maximizing your returns when learning how to get into real estate investing!
What Is Real Estate Investing?
Real estate investing is the purchase and ownership of land and structures to make money. This can include house-flipping, when investors buy residential properties, conduct renovations, then resell homes for a profit. However, some property investors prefer buy-and-hold investments used as homes to general rental income.
Residential real estate consists of single-family homes, multi-family homes, townhouses, and condominiums. However, “investing” is not as simple as just buying a property. Instead, a real estate investor must earn money from an investment property by applying critical strategies to make money off of property sales or from charing rent from tenants.
Most investors buy a rental property with the goal of producing consistent positive cash flow —this means earning more income each month than they spend on expenses.
How Can I Make Money from Real Estate?
In general, there are three main ways to make money from real estate investments: interest from loans, appreciation, and rent.
Appreciation: This is an increase in value or price—here referring to an increase in price that results directly from market conditions. To generate revenue from appreciation, investors hold property over time, then sell it at a profit. In other cases, renovating a property as a fix-and-flip investment improves the value and appreciation before selling to new owners.
Rent: Buy-and-hold property investors charge a fixed sum of money that a tenant agrees to pay in exchange for living in the property. This investing strategy generates consistent monthly revenue as long as the property owner retains the property and keeps it occupied with a renter.
Interest from loans: A third way to generate income from real estate is to become a private money lender. You’ll earn interest income from loans provided to other real estate investors.
Of these three strategies, many beginner real estate investors start with rental properties to generate income from rental payments.
What Are the Primary Real Estate Investment Strategies?
Real estate investment strategies fall into two groups: active or passive investments. Active investment strategies require more work than passive investment strategies but tend to generate higher returns for investors.
What Is Active Real Estate Investing?
With active real estate investing, an investor buys a piece of property and does whatever it takes to make more money, including working on the property! In return, you accept responsibility for all repairs or other issues related to owning the building or land itself. Investors must also cover taxes, interest payments, and additional costs associated with holding onto this real estate.
While you don't have to work exclusively on your own properties (you can hire a property manager to handle rent collection, tenant relationships, maintenance, and more), operating rental properties are considered “active” real estate investments.
What Is Passive Real Estate Investing?
Passive real estate investing requires much less “hands-on” work from real estate investors and involves less personal responsibility than active real estate investing, though it tends to produce lower returns.
The most common example of passive real estate investing is owning shares in a Real Estate Investment Trust (REIT). As an investor, you can purchase shares in a REIT that owns residential real estate. They operate the properties then pay dividends to shareholders or investors that participate in the trust.
Should You Invest In Rental Properties?
Many investors buy a rental property with the goal of producing positive cash flow to build long-term wealth. However, if you're ready to generate income from a rental property, make sure you're prepared! While rental properties are an excellent way to build long-term wealth, they require plenty of work and know-how to make them profitable.
A property management company in Coastal Virginia is the best way to invest in real estate rental properties to maximize returns. Choose a property manager that can do everything for you (so you don't have to)! The right property management company collects rent, finds quality tenants, handles maintenance and repairs, and stays on top of the leasing process. With property managers handling every detail, investors can enjoy "passive" real estate income from "active" investments!
Let a Coastal Virginia Property Management Company Handle the Basics (and More)
Real estate investing may seem daunting, but it doesn’t have to be! The right strategies can lead you on the path to success. Partner with one of the best Coastal Virginia property management companies like Osprey Property Management to help locate, acquire, and operate properties that maximize your returns with peace of mind knowing that every detail is taken care of.
Whether you choose passive investments or active investing (like owning and operating rental properties), the right strategies are crucial to your success. With years of experience managing residential real estate, the Osprey team is here to help you learn how to get into real estate investing successfully! Reach out soon to speak with our team.
Get expert tips for success! Download our free resource, “How To Invest in Real Estate: A Guide.”