Once you make the decision to invest in real estate, you must decide your path. Some investors aim to make quick cash, while others see value in a long-term investment. A number of options are available, each boasting their own benefits. Before diving into the unknown, we at Memphis Cashflow real estate want to explain how Memphis real estate investment properties work and the paths you can take to be successful.
Real Estate Investing in the Short Term
If you are hoping to make money fast using the real estate market, one strategy includes quick turning, commonly referred to as flipping, properties. Quick turning typically includes buying a property at a price deemed lower than expected, then marketed at a higher value following any improvements made to the property. The goal here? Make profit when you sell the property.
Quick turning provides real estate investors an opportunity to earn cash quickly by striking the right deals and finding the right value in properties. If you have a keen eye for Memphis investment properties that are currently undervalued, the quick turn market may be for you.
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Investing with Rental Properties
No one should be surprised by this option. Buying rental property and utilizing the space to rent to tenants has been an investment practice for years and will continue to be one. When you invest in rental properties, unless you hire a management company, you will be responsible for handling all of the responsibilities of renting the property out.
If you are considering a Memphis real estate investment property, becoming a landlord of rented property may be the most time-consuming option as the investment requires a devotion to maintaining the property, keeping the tenants satisfied and staying true to the long-term goal. Being the landlord comes with an array of responsibilities:
- Paying for mortgage and taxes
- Finding tenants and handling the rental agreement
- Handling irresponsible tenants
- Pushing for payments if the rent is late
- Dealing with damaged property
- Being the first contact for unit issues, sometimes in the middle of the night
- Handling repair requests and dealing with third party companies to complete them
However, perseverance to the end goal could generate an impressive long-term investment. Once the mortgage is paid, the majority of the monthly rental fees becomes profit. Additionally, the property’s appreciation creates a more valuable asset for the investor.
Investing with Real Estate Investment Groups
If the Memphis real estate investing market attracts you, but the active involvement of flipping or handling a property seems too risky, a real estate investment group may be best fit for you.
An investment group works as an owner, but not an operator. After a company buys or builds specific rental property, you and other investors in the group buy ownership through the company. By taking this route, you do have ownership, but the company manages the property’s units, maintenance, and other daily tasks.
This is called a turnkey property. You essentially buy a property that comes with both tenants and a property manager. This is especially helpful if you you live out of town. A turnkey property is ideal for those who don't have experience flipping houses.
If you are worried about the daily grind of real estate, join a real estate investment group. Beware, though, because not all real estate investment groups are reliable and trustworthy. Do your research before you decide to join a group.
Investing with Real Estate Investment Trusts
If you understand the stock market game and think that knowledge paired with real estate investment would work well, a real estate investment trust could be calling your name. A REIT invests in property or mortgages using investors’ money to operate, manage and purchase income properties.
To be a REIT, at least 75 percent of its assets must be invested in real estate, cash or treasuries, and 75 percent of gross income must result from the real estate market. Law states that REITs must have dividend payout ratios of at least 90 percent.
Like stock, REIT trades on major exchanges and can be a prime investment if you desire regular income through the stock market. While investors pay income tax on their payouts, REITs are able to deduct dividends and avoid the majority of tax liabilities.
While REITs seem complicated, they may be the best real estate investment option for you.
As you consider whether real estate investing in Memphis, TN is for you, remember that the market offers potential if you are dedicated and make the proper investments. If you have additional questions, do not hesitate to contact us here Memphis Cashflow at 901-213-6102. We are happy to help you make the next move!