How to Invest in Residential Real Estate
Updated: Mar 30, 2020
Residential real estate is considered any residential property smaller than five units. Residential investing is buying a property for the purpose of renting it to a tenant. The intent is to begin generating passive income and eventually to sell the property at a higher price.
There are two types of residential investments: (1) buying a fix-and-flip property; (2) buying a single-family home, duplex, triplex or fourplex. If you decide to get into the fix-and-flip business, realize it’s a full-time job rather than a passive investment. It requires finding a distressed property usually through a bank of some other distressed situation or at auction in a foreclosure proceeding.
Occasionally, banks or other financial institutions repossess properties from borrowers who fail to make the mortgage payments. These properties are often called “REO” properties. Usually, an REO property needs a lot of fix up. Many small investors have made considerable money buying fix-and-flip properties, but it requires a lot of time, work and money.
Purchasing single-family homes or multiple units is a very popular way to begin investing in real estate. The process is easy to understand. It requires a lot of patience to find the right properties that will produce a positive cash flow.
Purchasing property at auction usually means buying a property sight unseen. It also requires bidding against other seasoned foreclosure experts. It also requires having all the cash available to purchase the property prior to going to the auction because you must purchase the property within 24 hours or lose your deposit.
Regardless of which type of residential property you invest in, it’s always wise to engage an experience real estate advisor to help you with the acquisition and to guide you through the process.
ABOUT THE AUTHOR
Ken has been in the real estate business for over 40 years and has personally overseen the development and management of over $350 million worth of assets. Ken holds a B.S. degree in Accounting from Brigham Young University, a MBA from the University of Utah. Licensed real estate broker since 1976. He holds the following designations: CCIM, CPM, CRS,CCA. Served as the president of the Utah Apartment Association.