Trying to earn a living in Omaha real estate? Here are 6 proven techniques to investing use real estate investing to increase your financial standing!
A great way to build wealth is by owning real estate. That still leaves many options, and many approaches can be successful, but a common thread is they all start with buying real estate. In this article, we’ll cover some of the better known and less common approaches. Soon you too will be building your retirement with Omaha real estate!
① Buy and Flip
Flipping has been around for a long time and enjoyed a spike in popularity during the economic recovery of 2012-2017. There were many discounted properties available, often in horrible conditions. It was feasible to run a business buying, fixing, and selling these homes for a reasonable profit. As TV shows began to glamorize the process and private equity firms began funding flips, it became more difficult for small players to survive in many markets. Now that market demand exceeds supply in many markets, more consumers are willing to buy distressed homes and do the repairs themselves. Nonetheless, there are still opportunities in markets like Omaha. Careful selection of the market and property is critical to ensure you’ll have enough margin to complete the work. You’ll also need to carefully consider the repair costs, holding costs, and sales costs. Finally, leave a little margin for your profit so you don’t invest your time without getting paid. There are still homes available that make great flips, just be prepared to hunt for them.
② Buy and Hold
As an investor, you need to consider the long term. That means finding properties you plan to hold in your portfolio, at least until the depreciation runs out. The best buy and hold properties in Omaha are in up and coming areas that will likely appreciate. Before making an offer, make sure you understand the rents in the area and the costs you’ll encounter to maintain the property. You can use Rentometer.com to determine rents in the area. Long term holding is a great way to combine the advantages of appreciation, rental income, depreciation, and tax breaks into a single investment.
③ Buy Commercial
Single-family homes are a common place for investors to start, but commercial investments are work considering. They offer several big advantages: long-term leases, tenant funded improvements, more reliable payments, and higher rents. It is more complicated than traditional property investments, so you’ll want to understand the numbers before committing. Common data points include vacancy rate, net operating income, cap rate, and the gross rent multiplier for the property. You’ll want to ensure you are leasing the space to qualified tenants who you believe will be in business for a long time in your location. In commerical leasing, you can be much more decerning of your tenants. But, they will also be discerning about your property. Is it a high-traffic retail space? If off the beaten path, will it work well as a office or workshop? Recently, there is a growing demand for offices with limited use by companies required by regulation to have a formal office space (like home health care). They usually look for a low cost and are open to a smaller space. Regardless, choose the niche that works for you.
④ Buy Mobile Homes
Mobile homes can be a great way to start in real estate investment. Units are often inexpensive and repairs made will often cost much less. They are a unique type of property with specialized repairs, lot rent, and financing requirements. Fortunately, nearly every community in the country has a shortage of affordable housing and quality mobile homes are almost always in high demand. If you take a liking to this category, buying mobile home parks can be a great investment opportunity. But, keep in mind that special management techniques are required to stay profitable.
⑤ Buy and Divide
If you’ve conquered the concept of flips and holds, you may be ready to take your investing up a notch. Buying a larger tract of undeveloped land and subdividing it allows you to sell each lot for an amount much higher than your original purchase price. It’s possible to make millions on a single deal. Before beginning, make sure you understand the local zoning laws and ordinances. In many cases, it can be nearly impossible to make rational improvements to a property. Also, it’s important to ensure there will be a demand for the lots. A great deal on a large parcel doesn’t mean that buyers are ready to buy individual lots. Ensure there is an interest in building so that you will be able to make your money back more quickly.
⑥ Buy and Develop
Development is taking step three a little further. After you purchase raw land, you can develop it yourself. Depending on the lot size and the zoning restrictions, you might build a single building or divide it up for multiple structures. When considering your options, many industry pros will suggest you find the “highest and best use” for the property. They usually mean the thing that brings in the most income, but you may want to consider the impact on the neighborhood or needs within the community. This type of project takes years and a lot of upfront capital for success. In most communities, its best reserved for someone with a deep background in real estate or construction. If you don’t have a clear understanding of the process and everything that goes into it, you should engage folks familiar with the rules of your community.