For the first-time real estate investor, it is often tempting to only look at the potential returns that a prospective investment might deliver. But it is important to realize that there are other considerations that may ultimately prove to be every bit as important as the raw percentage returns that a property delivers.
Everyone who gets into real estate investing should first take a hard, honest look at themselves and precisely what their objectives are. It is true that it is possible for seasoned professionals to routinely make double-digit returns, with even triple-digit profits being possible for lucky investors in good years. But many of those strategies involve a great deal of expertise and, more importantly, a tremendous amount of active labor and time commitment. For those who do not want to treat real estate investing as a second or even a first job, there are some strategies that can generate decent returns with minimal risk and effort.
Look at ground leasing
One of the least risky and least time-consuming investments in real estate is a ground lease. Many investors jump into real estate investing focusing on the cashflow and potential appreciation returns that buying into a property like a duplex or a small apartment complex can generate. What they don’t take into account is both the risk and potentially huge time commitment that those investments may extract.
A ground lease, on the other hand, is the closest thing to a genuine buy-and-forget investment that one will find in the world of real estate. Although the returns do tend to be lower in terms of dividends, well-placed ground lease investments can have every bit of the appreciation potential of other investment types. And you won’t be getting any calls to fix broken garbage disposals at 2 a.m. on a Sunday morning.
Leaseholds can generate big returns
For those who are willing to put in the time and assume considerable risk, leaseholds are one of the most neglected investment types in real estate that can routinely generate solid double-digit returns. Although leasehold deals often require a large amount of work and a solid marketing strategy, they can generate truly huge returns on relatively low amounts of starting capital, far less than what would be required for the outright purchase of commercial properties.