Investing in real estate is one of those things that can make or break your bank. Making a bad investment can devastate your bank account. But real estate can do even more to your bank account and net worth overall.
Why Real Estate?
Just like with most investments, there are pros and cons. It can be extremely lucrative when done correctly. However, when done poorly, it can also be a bad investment. There are a few different ways of owning and investing in real estate. You can buy it and then flip it. You can buy it and then rent it. Or you can buy it and list it on Air BNB as a vacation rental. All these options can work very well, but only if applied in the right market. For instance, you would not want to Air BNB a house in the middle of nowhere. Also, you may not want to sell a place in a high-value rent area either. It may be best to rent it out to make your investment worth your time.
Why Buy Real Estate?
Real Estate is a good investment because land does not depreciate. The cost of it is only going up. Same with your home! The cost of buying is rapidly rising. However, it does depend on the location of the real estate.
What is Air BnB?
Air BnB is a website that links hosts to guests so that they can rent out your space, spare bedroom, your entire home, your apartment, or other spaces you may have. Why is this a game-changer? Well, Air BnB is much like a hotel – in the sense that you can have different guests every night. This strategy allows you to charge a nightly fee for your place every night. Imagine this – you could rent your home out that you purchased for a modest $125/night, and let’s say you have a guest four times a week.
That’s $2,000 a month. If you’re in a touristy part of town or a big city, you could have renters almost every night.
So, let’s do some math. Say you own a two-bedroom, two-bath home in downtown Dallas for $300,000. Your mortgage would come out to roughly $2,000. So far, you’re negative $2,000 a month plus $250 a month for upkeep. You’re in the hole for a total of $2,250. An Air BnB in downtown Dallas is an average of $200 a night. Should you rent out the property reliably for four nights a week, that’s $800 a week, $3,200 a month. After the $2,250 monthly costs plus the additional costs of utilities, is it worth it?
Why Rent it Out?
Renting out your property is a great way to invest your money. The rent from the tenants can not only pay off your mortgage and cover any maintenance costs, but you can also have smaller amounts of income every month.
Why Flip it?
Flipping a house is another way of making money in the real estate business. There are different ways to flip real estate. You can buy the property, renovate it, and then resell it. You can buy the property and then resell it. There is a risk on either side. The best way to mitigate risks is to leave a wedge of $100-$150k.
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