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Investing in Arizona real estate is more than just finding a place to call home. Real estate investing has grown in popularity for many years and because of the recent economic recession, many investors are buying homes in Arizona in hopes of making a huge return on their investment. 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 by far the most popular because the homeowner is building equity while making passive income at the same time. The owner of a home will rent it out and charge enough rent to cover the mortgage, homeowner’s insurance, taxes and any home repairs. 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 home has the lowest risk, and does not require a huge investment to see a profitable return.
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 renovate the home, and sell the house quickly at a profitable price. Some investors will purchase a property at below-market value and then sell it quickly to a second investor, who then sells it to another party. Investors who flip homes should always evaluate the neighborhood and current market conditions, and be careful that their remodeling costs do not become a financial liability.
3. Real Estate Investment Group
Some investors want to own a rental property, but don’t want the burden 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 all maintenance, 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 use investors’ money to purchase and operate income properties. REIT’s usually offer an investor high yields and avoid corporate income tax. REITs also can invest in shopping centers, office buildings 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 predictions. By doing your homework, working out a plan and leveraging your purchasing power, investing in Arizona real estate can bring you financial security and independence for years to come.