Do you know that over the last two centuries, 90 percent of the millionaires have been created by investing in real estate? Learn about investing in real estate as an active investor with rental properties or flipping houses, or as a passive investor in REITs, mutual funds, or online platforms.
Do you know that 90% of millionaires have been made over the last two centuries by investing in real estate? We all know the real property can’t be lost or taken away. The net value of every property goes up over the long term. It is never too late to make a sound decision. We will help you get started if you are not already investing in property.
You need to know first what sort of investment you want to do to get started with real estate investment.
Types Of Real Estate Investment:
There’s a lot more to real estate than buying property and making money out of it. You have a variety of investment opportunities. That is why investments in real estate are compared to boxes of chocolates. There is a lot of variety in chocolates; dark chocolate, chocolate with almonds, chocolate with caramel, coconut chocolate. Likewise, there are few forms of investment in real estate that you can make; land, residential, commercial, and industrial.
As John Stuart Mill, one of the famous philosophers, said, “Landlords grow rich in their sleep.” For beginners, investing your money in the land is one of the best and simplest ways to get into real estate. That means you are purchasing a piece of land in an area that you believe is worth acquiring in the long run. Take advantage of the high price of real estate and sell it in a few years.
The most common and known type of investment in residential real estate. A single-story or a multi-story house may be purchased and sold for a higher price. You should refurbish it and make a greater profit out of it. There is also an option to rent it out, which can produce an ongoing passive income.
As “The best investment on earth is earth”
Commercial properties are typically purchased and leased out. This is not the option to start with if you are a beginner. Even when commercial real estate is more of a niche than residential investment, it needs a lot of capital to be invested and there are more tax regulations to think about.
If you invest in warehouses or any large-scale factory, that is considered an Industrial investment. It is an investment option that is very sound, but it comes with a lot of difficulties. Since it’s a big property, it needs extra management. Industrial investment offers a rental return of about 10 percent as opposed to residential and commercial properties that give you a rental return of about 4 to 6 percent.
Ways To Make Money In Real Estate Investing:
Now that you know what industries you need to invest in, you need to know how to make money out of them. More wealth has been created by real estate than any other sector, but individuals are still reluctant of entering this path. The popular misconception is that to trade in real estate, you need to be a landlord, but that’s not always the case. You can still make money if you know what you’re doing, even if you’re starting. Here are some ways in which you can make real estate money:
- Renting It Out:
Renting it out is the most common way of earning cash by investing in real estate. At the beginning of every month, it gives you a consistent income. You will live on the ground floor and rent out the first floor to a family if you have a two-story home. You don’t need to think about the maintenance and repairs this way and it’s a decent amount of side revenue. There are higher returns on renting a commercial property as it is often leased out to a corporation.
Another way to make money is by contract flipping. For instance, in a nice neighborhood, you can find a nice house or you could buy a commercial property in a high-value market. You’re making an offer for, say, $85k. Now you find a buyer for the same property. Negotiate for $95k on the deal. When the buyer brings in $95k, $85k goes to the seller at the closing table, and the remaining $10k goes into your pocket.
- Buy And Hold:
“Don’t wait to buy real estate, buy real estate and wait”
A different tactic is to purchase a house to resell it in a few years when the market is right. This is called the technique of fix and flip. Investors are not looking for a property to live in or to rent it out. They buy a house at any property at a discount, they fix it up or renovate it if required to improve its worth. They might hold on to it for some time waiting for the right time. Or if they get a higher price bid by a buyer. They sell it.
- Collecting Interests:
You are working as a third party in this situation. You are indirectly interested in an investment in real estate. Another person, for instance, is looking for cash to purchase a house. So, you lend the cash to them and receive a particular interest in it. You serve as a borrower or a bank that loans them money. You’re going to gain a certain amount of interest on it when they pay you back the money.
How To Get Started With Real Estate Investing:
You are likely aware of the benefits of this career choice, but it certainly requires a degree of dedication that many might not be familiar with. You know the popular ways to earn money through real estate, now it’s time to find out which route is the best. Have a look at a few investment strategies for real estate:
- Be An Active Investor:
A successful investor has a very active role in the day-to-day aspects of the investments. To look over the deal operations, committed investors have to invest more time. For instance, an active investor, based on personal interests, will choose which property to purchase. He will renovate it himself or, by hiring a contractor. But to get the job done, he has to be there. A successful investor, if he wants to flip the deal, will find a buyer himself. It’s a full-time job. The more time and money you devote, the higher the returns you are likely to receive.
- Become A Passive Investor:
You can, on the other hand, become a passive investor if you have a permanent job. As a passive investor, you don’t have to think at all about all the tasks. All you have to do is invest your cash and wait for the returns. A passive investor typically hires a property management firm to take care of all the acquisitions and sales at the expense of management fees.
- Hiring A Real Estate Agent:
Obviously, as a beginner, you don’t have enough experience in the real estate sector and you want someone’s advice. You can fix your issues by partnering with a real estate agent you can trust. A good agent understands what a good investment is and what a poor investment is. You just have to pay your agent a certain commission and he will bring your investment to good use.
Real estate investment remains the real means of building the cash flow and wealth of a person. But it has pros and cons as well, like any other investment. You do not immediately start creating wealth. Real Estate involves lower risk than the stock market. You would have steady cashflows if you have enough rental property. Real estate, on the other hand, is a long-term investment; it takes time for the land to appreciate and produce income. Also, as you do in stocks, you cannot easily liquidate the house.
A flashback to the crash of the US housing market in the fall of 2008. It was the biggest decline in prices in history. During the recession, home prices dropped 33 percent. It fell to a level where people could buy houses that they otherwise could not afford.
“Life is uncertain and sometimes unpredictable, so you cannot be right all the time”