Most people want to live comfortably, and making money is the easiest way to achieve that goal. Whether you want to secure more passive income now or are planning for retirement, choosing the right investment options can change your financial outlook for the better if you are willing to do the research and put in the work.
One of the most lucrative types of investing is available in the real estate space. Real estate investment has been used by many to secure their futures, create passive income streams, and strengthen their portfolios for decades. There is a lot of versatility with real estate investing, so it is accessible to people from many walks of life.
If you are interested in building a real estate investment portfolio, the state of California offers plenty of opportunities to do so. Here are 5 ideas that you can consider to start building your investment portfolio.
BRRRR Method
If you love the idea of purchasing residential properties and converting them into rentals, then you might want to consider the BRRRR method, which stands for buy, rehab, rent, refinance, repeat. With this strategy, you buy a distressed property, make repairs, rent it out, take a cash-out refinance, and then use that money to buy another property. This cycle continues as you build your rental portfolio, creating passive income from each property that can really scale your finances. It requires a lot of research and work, as finding the right properties to purchase and renovating them will take up a lot of your time.
Rental Properties
Take a few steps out of the BRRRR method for a slightly simpler investment strategy. Purchasing rental properties, or turning a property you already own into a rental, is a great way to create passive income for your portfolio. Though homeownership is a goal for many in California, there is still a very large percentage of the population that relies on renting. You could invest in rental properties by securing a DSCR loan, which is given based on the earning potential of a property, or you could turn your property into a rental unit. People will always need places to live, and this method of passive income has helped many investors improve their financial futures.
Vacation Rentals
Travelers from all over the world come to California for the sights and sounds that they can experience, and you can take advantage of this tourism by investing in vacation rentals. You could turn one of your properties into an Airbnb if it is in a desired location. You could also look into park model cabins for sale that are technically classified as RVs, so you do not have to worry about property taxes or permits. Getting in on the vacation rental industry, especially in the Golden State, is a lucrative opportunity for those willing to do the research and with the resources to purchase property in a prime location.
House Flipping
One of the most well-known real estate investment strategies is flipping houses. Similar to the BRRRR method, the investor first finds a distressed property to purchase. Then, they cover the costs of renovations and repairs, conducting the work themselves, or working with a contractor. Once the property is in selling condition, they will look for buyers to make a profit off of the sale. One thing to know about flipping houses is that it can be very difficult. A lot of work goes into the rehab process, and since you will be selling the property, taxes will come into play. Plus, you will be spending a lot of money on the upgrades, so make sure the profits you can make on the sale price will cover the initial investment.
Commercial Properties
While the opportunities discussed previously are all residential, there are also commercial opportunities for real estate investors. Owning buildings or land that companies then rent from you to use can also line your bank account with some extra income, though the upfront costs are generally higher than most residential investments. Commercial investing is also a great way to diversify your portfolio if you already have secured properties in the residential space.
Know Your Stuff
Investing always includes some level of risk. The more involved the strategy is, the more important it becomes to be knowledgeable about what you are doing. Real estate investing in California can certainly yield great profits, but it can also be incredibly challenging. Spend a lot of time in the research phase learning how real estate investment works and what opportunities would best suit your goals. If possible, speak with investment professionals who can give you a roadmap to success. Getting into the game before you have the necessary knowledge could result in a bad investment that ends up losing you money, so make sure you know your stuff before getting started.