Real estate can be more than just a place to live. For many people, it can be a way to make money, an investment, or even a hobby. No matter your walk in life, looking at real estate in terms of more than your living needs is a great way to further your financial stability and diversify your income. However, I would caution against any thought that it is easy or completely safe to make money in real estate. Here are a few different ways to look at real estate as an investment, as well as a few cautions to keep in mind.

Rental Properties

It seems like everyone wants to have a rental property nowadays. And the thought is certainly appealing. At its best, it allows you to hold an appreciating asset while getting monthly payments to offset your purchasing costs. However, getting a loan to purchase an investment property such as this is not always easy. And a loan will be necessary unless you have substantial liquid assets. Secondly, most people wanting to be landlords forget about the amount of work that goes into maintaining a successful rental. Not only will you be required to provide substantial amounts of expertise and labor, but maintaining tenants will have its own sets of challenges. You can’t buy a property and simply expect money to start coming in every month. There will be insurance, financial, and legal steps to take before you can even consider finding a tenant. And once you do, you will have to deal with them. Hopefully they will be respectful and prompt with payments, but this is not always the case, and you should be prepared for the worst.

Flipping Houses

Another common method for using the real estate market to earn money, some people look to buy properties with the intent to resell them for a higher price, typically within a year of purchase. Flippers will typically renovate the property, although what this entails can vary wildly depending on the person in question. Again, this is not a risk free or easy endeavor. You will need to be quite knowledgeable about many types of renovating work if you plan on doing it yourself, or have a sizeable budget if looking to pay a contractor. Additionally, you will need to avoid downturns in the housing market, as these can drastically decrease your chances of reselling at good value.