Advatages and Disadvantages - 10 Ways to Invest in Real Estate

There are different types of real estate, and different ways to invest in them, and it is essential to combine these two factors in a means that suits your particular needs. Here are a few possibilities to consider, with their advantages and disadvantages.

1. Rental Houses.
Advantages: Easy way to get started, and reliable long-term return on investment. Disadvantages: Being a landlord is tedious, and you generally wait a long time for the big pay-off.

2. Rent-to-own Houses.
Advantages: When you buy, then sell as rent-to-own arrangement, you get higher rent payments, and the buyer is usually responsible for maintenance.
Disadvantages: The bookkeeping is tricky, and most tenants don't complete the purchase (this can also be an advantage, but it means more work for you).

3. Low Income Rentals.
Advantages: The same as any other rentals, but higher cash flow.
Disadvantages: The same as other rentals, but more repairs and tenant problems.

4. Fixer-Uppers.
Advantages: Quick return on investment, and more creative work.
Disadvantages: Higher risk (unpredictability) and heavy taxes on the gain.

5. Buy for Cash, Sell for Terms.
Advantages: High rate of return by paying cash for a low price, and selling on easy terms to get a high price and high interest.
Disadvantages: Tying up your capital for a long time.

6. Buy Land, Split it and Sell it.
Advantages: Simpler than most real estate investments and has possibility for high profits. Disadvantages: It can take a long time, and you have expenses and no cash flow while you wait.

7. Boarding Houses.
Advantages: You can get a lot more cash flow renting a house by the room, especially in a college town.
Disadvantages: You can get a lot more headaches renting a house by the room, especially in a college town.

8. Commercial real estate.
Advantages: Long term triple-net leases mean little management and high returns. Disadvantages: Tough market to get into, and you can lose income on vacant storefronts for a year at a time. Find more information on commercial real estate investing.

9. Buy, Live in it, and Sell.
Advantages: The new tax law means you can fix it up and sell for a big tax-free profit after two years, then start the process again.
Disadvantages: You have to move frequently.

10. Speculation.
Advantages: Buying during growth and holding until values increase and yield large profits, especially if you buy low.
Disadvantages: Prices are unpredictable, you have expenses with no income while you're waiting, and transaction costs can eat much of the profits.