Comparison: Four Real Estate Investment Strategies
With so much uncertainty in the securities markets recently, smart investors are finding better alternatives for their portfolios and real estate is one of the most appealing strategies.
There are ways to directly and indirectly include real estate investments in your portfolio, some of which you may already be familiar with and others that might be somewhat less common. While all of these can give you a good return on your money, some require more “care and feeding” on your part. Here’s a quick overview.
Residential rental property
Investing in single-family homes or properties of two to four units has been one of the most common ways investors get involved in real estate. Strategies vary from location to location and over time. Sometimes these investments pay off through appreciation. Other times investors are looking for a strong positive cash flow.
The down side of owning residential real estate is dealing with property management. Owners who opt to self-manage their properties can get stressed out pretty quickly. Professional management takes away some of the worries – not all – but can eat up cash flow in fees.
Buying a vacation home in a great location with the intent to earn rental income is always tempting and it can work for some people in certain locations. However, most who investigate this strategy end up deciding it’s not for them.
First, tax law limits how much time owners themselves can use the property. Next, “rentability” is usually limited to certain seasons, which holds down income. On top of these there are significant management and maintenance expenses.
Also, you can’t depend on the same kind of appreciation patterns with vacation properties as you can with more standard residential real estate. Also, you’re buying in a location that you’re unfamiliar with and that’s never a good idea with real estate.
Second home ownership isn’t limited to the super wealthy any more. Some professionals purchase second homes in the city where they work in order to eliminate a long commute. Sometimes these second homes can be rented out for short stretches during the year. As an investment, you’re mainly banking on appreciation.
Tax law and financing options vary, so you need to get advice from an experienced professional if this strategy sounds like it might solve some of your problems. If you plan to rent it out occasionally (Airbnb?), you’ll also have to deal with management and maintenance issues.
First trust deeds
Directly buying property isn’t the only way to benefit from the strength we’re experiencing in the real estate market today. Funding hard money loans to California home buyers and real estate investors is perhaps the most hassle-free way to go. And frankly, with the double-digit returns we’re offering at Evoque Lending, it’s highly likely you’ll be enjoying a better ROI than the borrower.
We specialize in hard money loans via First Trust Deeds on California real estate – especially Los Angeles real estate, Orange County real estate and property in the San Francisco area.
Further, you don’t have any of the property management headaches when you include First Trust Deed investments in your portfolio. Unlike being a landlord, you can head to Hawaii for a month’s vacation and not have to worry about getting a phone call from a tenant whose toilet is backed up.
As you’re considering your real estate investment options, I urge you to contact me at Evoque Lending. I’ll explain how we build protective equity into all our First Trust Deeds and vet our borrowers to protect your interests.
I think you’ll discover that California hard money loans can help you achieve your investment goals more quickly than you currently believe is possible. Give me a call or drop me an email today and we can get started.