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. Buying a property to rent
This investment is the most popular because the homeowner builds equity while earning 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 ask for more to get a monthly surplus, or wait until the mortgage is paid off, so that the majority of the rent is pure profit. Owning a rental property has the lowest risk, and doesn’t require a huge investment to increase cash flow.
2. Flipping property
Flipping a property is the practice of buying a home and quickly reselling it for profit. Usually, an investor will purchase a home that is below market value due to the house’s condition. The investor will then remodel the house and sell it quickly at a profitable price. Some investors will buy a property at below-market value, sell it quickly to a second investor, who then sells it to someone else. Investors who flip homes should always evaluate the neighborhood and current market conditions, and be careful that their remodeling costs do not exceed the full market value of their home.
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 join an investment group in which an investor will buy one or more apartments or condos from a company who manages multiple 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 purchase and operate income properties with the investors’ money. REIT’s usually offer an investor high yields and avoid corporate income tax. REITs can also invest in shopping malls, offices and hotels. 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, developing a plan and leveraging your purchasing power, investing in Arizona real estate can bring you financial security and independence for years to come.
