One of the most common responses to asking where you should invest your money is ‘bricks and mortar’ pumping your money into real estate in order to see some healthy returns. This is all well and good but how in fact do people actually make money from their investments in real estate. To get to the bottom of this and show you how money can be made from these types of investment, we caught up with real estate guru Tyler Tysdal to find out.
We often think about private equity funds in the shape of a hedge fund which invests in the futures market or stock exchange, but there are also private equity real estate groups. Usually these funds are used by the wealthy and many of them have a minimum buy-in of $250,000. These funds will then spread out their capital across a range of real estate and then begin to offer annual returns. These funds actually came to prominence in the 90s when the market crashed and families and rich individuals realized that pooling their money could help them see bigger margins on their investments.
Those who know real estate inside out can make some strong profits from flipping houses, which is basically the act of buying low and selling quickly for a profit. In most cases the people who flip houses will buy from an auction, and the properties are usually in need of some work. The properties are picked up at the low end, given some TLC to get them back to a high standard, and then sold for a good profit. Flippers will usually buy and sell multiple properties per year in order to make stronger profits.
Long Term Strategy
The most common type of investment, especially for Joe Public, is to buy a property whilst the market is down, or in an area which they think will later boom, and then look to rent the property out over the long term. What this does is enable the owner of the property to see cash flowing back to them each month, and in many cases they hold on to a property for long enough so that the house is actually paid off with rental payments alone, leaving the property completely paid for. In most cases the people who buy-to-rent will be doing so with nothing more than a long term strategy in mind, but there are also many people who will do this until the price of their property increases, at which point they may wish to cash in on their investment. Rental prices don’t rise and fall in line with property prices which is why this is a plan which can cover you if the market does happen to slump, as there isn’t a call for rental prices to be lowered in such a situation.
Which will your bets approach be?