For some people who are trying to expand their financial portfolio, one of the most dependable methods is real estate investing. That’s not to say it doesn’t come with its own set of risks (as does any type of major investing), but for those who have the means, being the owner or manager of a second property is a fruitful idea. There are different types of properties that someone can ultimately purchase, and how they use it will help determine what sort of return they make on that investment.
Any type of real estate purchase shouldn’t be made on a whim. Given the amount of capital required, you want to have a pretty good idea of your short and long term goals with the investment. Working closely with a financial advisor, create a plan and know what sort of transaction you can actually make. Are you just looking to own a vacation home in another state? Do you want to become the owner of a larger property like a apartment complex or an office building? Each of these ventures is going to to be slightly different in terms of the monetary requirements, tax laws, property laws, and so more more. This is also all going to vary depending on which state you make the investment. This goes back to the the early planning stages, and thinking of all these different angles prior to making those commitments.
If you’re someone who is simply looking to own another property in another state, you have some flexibility in terms of how it’s used. Once you own it, and fill it out enough to be liveable, you should strongly consider renting it out during the months when you’re not there. If the second-home is in a warmer state like California that has nice weather year round, there is going to be a demand for people to use that space.
However, you should have a well mapped out schedule of when you know you’ll be taking trips to that property, and then you can start advertising to rent it out during those other times. This way, besides just owning a property that can be sold at a later date, you can also get income from renters during their vacation. You obviously need to be mindful of maintenance costs, and how much utilities will be when you’re visiting, and when others are renting. Managing a property like a second home is quite involved, so make sure you know what you’re getting into.
Another investment opportunity that you see some people taking advantage of is becoming the owner (or partial owner with other investors) of a larger property. This can be an apartment complex, a warehouse space, or an office building. The management of these types of properties is going to be different than just renting out your home for a few times a year when you’re not there. Essentially, you’re also becoming a landlord. This is a far more involved investment, but you can get more consistent return from those who are renting.