Hey Taylor – I came into some money recently and feel like I finally have the opportunity to invest in real estate, but I’ve got no idea how to go about it. Do I just buy a second house? Buy an empty lot and start building? What would you recommend? – Emmett
Hey Emmett – Congrats on what might be a big financial milestone for you! I count myself among the many who have had the privilege to make important financial strides thanks to real estate investing, and I hope you have a similar run of good fortune.
As for what you invest in, that’s a big question with more than one answer. It depends on the effort and time you want to put into it, so let’s consider some of the options.
–1. A second house. Buying a second home could be a solid option. Without the pressure to turn it into a rental, you might consider purchasing a vacation home that works for your family’s needs and may also act as an asset when the time comes to cash in on it. If you’re not looking to make money in the near term on this investment, buying a lake house, a downtown condo, or whatever sounds best to you is a fine option. You just want to make sure you don’t buy anything with a price tag well above what you have to invest. It’s important to avoid putting yourself in a position where you’re strapped for cash, trying to cover two mortgages.
–2. Rental property. As far as investments go, a single-family home that earns you monthly income can be worth exploring. Often, the rent may cover your mortgage and some of the taxes, and after a few years, you either have a property that can be sold for more than you paid, or a rental that can keep on generating passive income. If you go this route, you get to choose how personally invested you are as a landlord. You can do every bit of maintenance yourself and exchange your time for money, or you can put the responsibilities in the hands of a rental agency and make a little less while staying hands off. Buying a rental that’s managed by someone else also allows you to look at faraway markets where real estate seems to be booming.
–3. Don’t be limited. One of the great things about real estate is the variety of ways to get involved. Some people invest in commercial properties for rental income, while others use third-party platforms to invest in things like farmland. It might be worth talking to people in your area to see what types of investments are working well for them. You can flip a house and see if you love it or hate it, then decide what to do next. Lots of people end up getting hooked on real estate investing after the initial purchase, so just stay open to the opportunities available to you.
You’re already asking questions, which means you’re off to a good start. Figure out what’s best for you and your family and try to enjoy the process. Good luck!
Taylor Kovar, CFP®
CHIEF EXECUTIVE OFFICER
