Investing in Arizona real estate is not just finding a place to call home. Real estate investing has been popular for many years and with the downturn in the economy, most homes in Arizona are being snatched up by investors who hope to make a fortune in the near future. There are many opportunities for investing in Arizona real estate, but here are 4 common ways to diversify your portfolio, hedge inflation and make a profit:
1. Rental properties
This investment is by far the most popular because the homeowner is building equity while making passive income at the same time. The owner of a home will rent out a property and charge enough rent to cover the mortgage, taxes and property maintenance. The landlord can also charge more to produce a monthly profit, or wait until the mortgage is paid off, so that the majority of the rent becomes profit. Owning a rental property has the lowest risk, and doesn’t require a huge investment to increase cash flow.
2. Property flipping
Flipping a property involves buying a home and reselling it quickly for profit. Usually, an investor will purchase a home that is considerably lower than market value because of the house’s need for renovation or repairs. The investor will then remodel the house and sell it quickly at a profitable price. Some investors will purchase a property at below-market value and then sell it quickly to a second investor, who then sells it to another party. Investors who flip homes should always evaluate the neighborhood and current market conditions, and be careful that their remodeling costs do not become a financial liability.
3. Real Estate Investment Group
Some investors want to own a rental property but don’t want the hassle of being a landlord. So they become part of an investment group in which an investor will purchase one or more townhomes or apartments from a company who manages several units. The company takes care of any repairs, advertising and finding tenants for a percentage of the monthly rent. The quality of real estate investment groups varies greatly, so always do your research before joining.
4. Invest in a REIT
A REIT (Real Estate investment trust) is a security that sells like stock and invests in real estate directly. Individuals can invest in REITs by purchasing their shares directly or investing in a public real estate mutual fund. A corporation or trust will use investors’ money to purchase and operate income properties. REIT’s usually offer an investor high yields and avoid corporate income tax. REITs will also invest in shopping centers, office buildings, hotels and apartment complexes. REITs offer a highly liquid method of investing and is one of the most stable ways to invest in the market today.
How you want to invest will ultimately depend on your financial goals and plans. By doing your homework, working out a plan and leveraging your purchasing power, investing in Arizona real estate can bring you financial independence and security for years to come.