The real estate investment industry is enormous, as are the number of budding investors who are entering this space. In fact, real estate has proven to be one of the most lucrative investments in recent decades, with returns that can outperform almost any other asset class.
Real estate investing comes in two basic forms: traditional real estate and creative real estate. Traditional real estate is the more traditional form of investing in residential or commercial properties, while creative real estate is more like passive investing in real estate partnerships.
In this article we’ll focus on the key differences between “traditional” and “creative” real estate investing and the benefits each of them offers.
Traditional Real Estate Investing
Traditional real estate investing is the practice of buying and selling properties to make a profit. It is also called “buy and hold”- You buy a property at a good price, then fix it up and rent it out until you sell it for a profit.
The property can be a single family home, an apartment building or even an office building. It can be located in any part of the country, but it must have an income stream so that you can get positive cash flow from it. This strategy works well if you have time and energy to devote to managing the properties yourself or if you have a team of people who are willing to do so for you.
Benefits Of Traditional Real Estate Investing
It offers passive income streams that last forever! If you get your numbers right (and don’t overpay for your rental property), you can live off the rent checks forever without having to do anything else but collect them every month. Other merits are:
- Rental Income: The income from property ownership can help reduce your tax burden.
- Long-term returns: Property can appreciate in value over time, which can help generate additional wealth.
- Diversification: Real estate is a relatively stable investment, so it’s a great way to diversify your portfolio.
- Cash flow: You can use the rent from your tenants to cover some or all of your mortgage payments.
Creative Real Estate Investing
Creative real estate investing is the way of making money in real estate without actually buying and selling properties. The idea behind this approach is to use your investment knowledge to generate passive income.
The goal of creative real estate investing is to employ unconventional financing and other tactics to enable you get the greatest possible values on properties, buy them for less than market value, or spend less money upfront while keeping your capital safe.
Some of the best property investment videos and investment courses online will provide you more insight into the creative investing methods.
Benefits And Strategies Of Creative Real Estate Investing
There are many different ways you can invest in real estate, below we’ll take a look at some of the more creative methods you can use to increase your property portfolio:
Flipping houses are a brilliant way to profit from undervalued properties with little effort and expense. When a property is purchased, renovated, and resold for a greater price, it is referred to as a “fix and flip.” The goal is to make a profit that exceeds the costs of purchasing, supplies, labour, advertising, and selling.
With lease options, investors offer homeowners a lease option agreement (LOA) instead of selling their home outright.
Real Estate Mutual Funds Or Real Estate Investment Trusts (Reits)
REITs enable investors to pool their resources and purchase major real estate holdings. You can invest directly in these assets in any amount you want without having to own or manage the full property.
Real Estate funds and REITs provide investors with a good return on investment while avoiding the risks that come with today’s market.
Rent-To-Own agreements are another good way to acquire real estate by arranging monthly payments with the owner.
Real estate investing can be a great way to build wealth. If you’re interested in using real estate as an investment vehicle, you’ll need to determine whether you want to go with a traditional or creative approach.
Traditional real estate investing is a time tested approach whereas creative real estate investing increase the number of investment options available to investors and involves some risks. Find out which one is best for you and always remember to read the terms and conditions before signing any agreement.
Editor’s Note: This article is for informational purposes only and does not constitute financial or real estate advice. As well as making money from property your capital is also at risk. Please confer with a licenced professional before making any investments