End of year bonuses are exciting - they open the door to so many possibilities. Are you going to put it toward a remodel? Buy a new computer? Perhaps plan a well-deserved vacation? Maybe you’re a bit more practical and just want to sock it away in savings. All of these are great options, but there’s one more we’d like to propose: invest your year-end bonus into real estate.
Many people realize that investing in real estate is a great way to grow your personal net worth and perhaps put you on track to a great retirement nest egg, but you might be unsure as to how to go about it. There are a few ways to invest in real estate - below we’ll go over some of the most common ways, and weigh in on which ones are the most likely to work well if you’re planning to invest your year-end bonus into real estate.
Long-term Property Ownership
Whether you’re looking at purchasing a first or second home for yourself, or are interested in becoming a landlord, property ownership is one of the best investments you can make, hands down. In fact, one of the main ways that most people look at long-term property ownership in terms of investing is to become a landlord, either for residential or commercial property. However, landlordship might not be something that everyone looks forward to - after all, when you’re the landlord you’ve got to find tenants, chase rent checks, and either maintain the property or hire a company to do it on your behalf (which costs money). It can be a lot of work, and for some people they’re looking for less of a time commitment, which is understandable.
Short-term Property Ownership (Fix and Flip)
The second most popular method of property investing is to become a property developer or flipper. By purchasing a piece of property for a short period of time, renovating it, and selling it for a profit there are some individuals who are able to create a nice nest egg or even build their entire careers on this model. Similarly, developers who build a fresh property - commercial or otherwise - are able to delve deeply into what an area requires and sell the properties for top dollar to keep up with supply and demand.
Finally, there’s passive real estate investing. If you’re looking to invest your year-end bonus into real estate, this is one of the best ways to go. Rather than having to purchase property and maintain it, passive investors invest their money into a fund - in much the same way they would invest in the stock market - and earn returns on their investment. With some real estate investment firms there is a minimum investment amount that could be in the tens of thousands of dollars (or higher!) range, whereas with others the investment amount is much lower. Regardless, prospective investors should be certain to do their due diligence and fully vet the firm before making any investments. A qualified, competent investment firm will be transparent with their process and return rates, and will happily explain the ins and outs of how they work with developers to investors.