Simple Ways to Invest in the Arizona Real Estate Market
Investing in Arizona real estate is more than just finding a place to call home. Real estate investing has been popular for many years and because of the recent economic downturn, many homes in Arizona are snatched up by investors, hoping to make a huge profit in the long-term. 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 it out and charge enough rent to cover the mortgage, property taxes and any necessary 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. Property flipping
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 considerably lower than market value because of the house’s need for renovation or repairs. The investor will then renovate the home, and sell the house 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 Arizona real estate should always consider the neighborhood and current market and be careful that their renovation costs do not exceed the full market value of the 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 all maintenance, advertising and finding tenants for a percentage of the monthly rent. The quality and involvement of real estate investment groups varies, so always do your homework and get recommendations 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. REITs generally offer high yields and have special tax considerations. REITs will also invest in shopping centers, office buildings, hotels and apartment complexes. 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.
