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Real Estate Investments as a Second Source of Income

by Shawn M. Grimsley

If you want the potential to earn a significant income on a part time basis, you may want to consider real estate investment. It presents many advantages, including the freedom to be your own boss, the ability to increase your net worth, and earn additional income all at the same time. It's not always easy, and will require discipline and effort, but the rewards can be significant.

Residential Rental Properties

Investing in residential real estate offers the ability to earn income through rents as well as holding an asset that usually appreciates in value over time. Make sure your projected rental income covers the loan obligations, projected maintenance expenses, taxes, insurance, some reserves for periods of vacancies and other expenses related to owning the property. What's left is your income. It may not be much, but remember that your tenants are buying the property for you.

Commerical Rental Properties

In a triple net lease, the tenant pays the property taxes, insurance, and maintenance.

Investment in commercial properties is also an option. Commercial property is simply property used for business purposes such as office buildings and retail spaces. Large apartment complexes are sometimes considered commercial properties as opposed to one- to-four unit apartment houses. Commercial real estate investment is more costly and complicated so you should pursue it only if you have experience in real estate. The opportunities for asset appreciation and income is the same as residential real estate. However, you have more leasing options available when leasing commercial properties such as net leases, double net leases, and triple net leases.

Flipping

If you've paid attention to cable television over the past decade, you probably already know about house flipping. The concept is simple: buy a house cheap, fix it up, and sell it. It's far harder than it sounds and can be very risky. You should be well versed not only in real estate but also renovations or have people that are experienced in these areas. The goal of flipping is to turn a quick profit and not hold or rent the property. Timing, budgeting, and quick sales are everything.

Utilize Professionals

Real estate investment can be lucrative, but it is also risky and complicated. The wise real estate investor realizes that you need to invest in the business of investing, not just in the properties. This means you should build a team of professionals to help you. Develop relationships with bankers, real estate brokers, real estate attorneys, accountants, property management companies, as well as general contractors, plumbers, electricians, and other trade professionals. Keep in mind that these people may also serve as great referral sources of investment opportunities as well.

About the Author

Shawn M. Grimsley holds a bachelor's degree in political science, master's degree in public administration and a Juris Doctor. He practiced law for 10 years, focusing on general business law, securities law, real estate and civil litigation. Grimsley now serves as a teacher and writer.

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