As I mentioned earlier, investing in real estate is one of the best ways to build wealth. With that said, it’s important to be clear about what kind of investing in real estate you want to do.
Just like with any investment, there are different levels of investing in real estate. The first level is buying or renting a house and living in it. This is not investing unless you plan on staying in this home for at least two years!
If this isn’t you then this article won’t make much sense– stay away from real estate! The second level is owning your own piece of land either as a duplex, quad, or acreage.
This is more involved than the first, but not as complicated as investing in residential property which is the third level. We will talk more about those types of investments later on in this article.
The fourth level is investing in commercial real estate which we will discuss slightly differently than the other three because it doesn’t always include a residence. A lot of times people who invest in business real estate don’t live anywhere close by so it is considered an area risk rather than a location risk.
That being said, they can be just as difficult if not harder to manage due to all of the things that go into creating a successful business.
Renting or buying? That is the question
There are two main types of investing strategies, owning or renting an asset and investment in real estate or not. The best way to invest your money depends on how much capital you have, what your long-term goals are, and what type of returns you want to see.
If you do not have a large amount of money to invest, then perhaps investing in the stock market is the better option. This can be done through stocks or bond markets.
By investing in bonds, you are investing in IOU’s (I Ouch) that pay interest back to you. By investing in stocks, you are investing in companies that make their income from products and services they provide to other businesses or consumers.
The important thing to remember about both investments is that neither one guarantees a return of profit. What makes one work for you will be different than what works for someone else.
Location matters
When it comes to investing in real estate, your location makes a big difference. Whether you are buying or selling a house, knowing your area is important so that you know what types of neighborhoods are stable and how much money you will need to invest.
The type of neighborhood you live in also makes a huge difference when it comes to investment return. A high-income area may not be the best place to invest if you want to lower your income.
On the other hand, an expensive suburb with lots of amenities can waste your hard earned cash because you’ll have to pay too much for a home there. These things matter more in the long run than quick gains.
There are many ways to determine the stability of an area. Looking at online tax documents, talking to people around the area, and doing research about schools in the area are some tips for finding out more.
Property values rise
A rising market is always great news, but it can also be quite scary depending on your status quo. If you have a house with lots of bedrooms in a nice area, buying another one close by may feel like too much responsibility.
If that’s the case, try to hold off for at least six months before you make the switch. It takes time to find a new home and get all of the things you need to live there installed.
Don’t worry about leaving the current property empty; many people are able to rent out their homes while they search.
Appeal to your values
As we mentioned before, investing in real estate is a great way to build wealth. But what are those values you should invest in? What types of properties appeal to you?
You may like buying expensive high-end homes with lots of amenities or maybe you enjoy creating new decorations and developing creative projects. Either one can be very satisfying!
Whatever type of property you choose to buy, make sure it fits into your life effectively and consistently. You want to feel that it is just yours – not someone else’s.
Also, remember that value does not necessarily mean price. A home that has been around for a while but is still functional and consistent in quality will most likely retain its value.
Real estate is a wonderful long term investment because it keeps mounting up over time, especially if you keep improving it.
Do not rent your house
While it is tempting to move onto the next thing, doing so will cost you money in the long run. The easiest way to do this is by renting out your current home.
There are many ways to make passive income through real estate investing, but staying in your current residence is one of the best. This is because you can save lots of cash per month in property management fees!
By selling your house, you also lose out on potential capital gains. Although they may be limited depending on what type of investor you are and what kind of properties you invest in, they are still possible rewards for putting in the effort into building up your wealth.
Selling a house is usually much less expensive than buying a new one, which could easily set you back tens or even hundreds of thousands of dollars.
Consider a co-owner
When investing in real estate, there are two main types of individuals involved. One is the property owner who holds onto the property and seeks to make it more valuable, and the other is the investment professional or broker that helps you find, evaluate, and negotiate on properties for sale or rent.
The second type of investor is not as common these days. Due to regulations put into place over the past few decades, most people do not feel comfortable working with an investment professional.
This can be quite limiting because professionals have been shown time after time to produce better returns than non-professionals. In fact, some studies show passive investors (those who let someone else handle all the transactions) actually lose money!
That’s why it is important to go into real estate with at least one other person. You can both work together on finding your next house, sharing expenses, and ensuring a good return on investment. A lot of companies will even facilitate this through their services so you don’t need to get too creative.
There are many ways to choose who gets what part of the deal. For example, you could each pay half up front and agree to buy a certain percentage later. Or, you could invest equally in a family trust where income is distributed according to age. Either way, stay within yourself of budget and ensure fairness among everyone.
Leverage your home for investments
While owning a house is not a bad thing, most people use their homes as an income source rather than an investment vehicle. By investing in real estate instead of renting or selling your current home, you can create additional wealth.
A lot of people invest in dividend paying stocks or stock portfolios, but they are still limiting themselves by only buying what’s available directly from the company.
By investing in other businesses that will benefit from your shopping habits, you can increase your overall portfolio while also creating new opportunities to earn extra money.
There are many ways to leverage your own home into business profits.
Stay consistent
Consistency is one of the biggest factors in real estate investing. This can be done in many ways, but staying in your business model or strategy year after year is a good way to ensure success.
Running out of money is totally normal when it comes to real estate investing!
Most people start investing by buying a few properties. But if you want to keep succeeding as an investor, then you have to push yourself to buy more houses and invest more money.
This isn’t necessarily a bad thing! It’s just important for you to know what kind of investment partner you are before you dive in too deep.
You should expect to spend most of your time alone when investing. Even during the times when you do make a sale, you will probably handle the transaction solo. This is how it has to be because there is always someone else involved-the lender, the tax office, etc.-that needs to be contacted next.
But this doesn’t mean that you can’t become friends with those who you deal with often! Investing is a very social activity, and having friendships outside of work is great for your mental health.
