Investing in Real Estate can give you a fortune – but only when done properly.
Getting into Real Estate investment is one of the best ways to grow and secure your wealth over time. In real estate, when you buy a property, you can be certain that it will eventually grow over time – if you make the right decision. While this form of investment is riskier than others because it entails a bigger amount of money – historically speaking, investing in real estate is a sure way to grow your money in the long run. This method of investment is even better for many individuals since it’s a tangible asset, as opposed to stocks and mutual funds.
So, if you’re considering investing in real estate, you came to the right place. In this blog, we’ll be giving you the basics of real estate investment, perfect for beginners.
Why Should You Invest in Real Estate?
Real Estate has always been the top industry choice of business moguls. In fact, up until now, billionaires still recommend real estate investment as one of the best ways to grow your wealth over time. Investing in real estate can be your long-term investment, a passive income, or even a strategic move to start building your wealth.
But more than that, here are the top reasons why you should invest in real estate:
In investments, you want to make sure that your money will eventually increase in value. With real estate, the good news is that properties typically increase in value over time. Based on market data, the trend in terms of the average home prices in the U.S. is constantly increasing. Hence, investing your money in a property will certainly do you good in the long run as it will certainly set you up with bigger profits
Take note however that your decision in real estate investment must always be a smart one since you don’t want to be wasting your money on a sketchy investment.
Stable Market Movement
Unlike other assets that suffer from price volatility, the real estate industry is pretty solid in securing the value of your investment. Unlike in the stock market, property prices are not erratic or fluctuating. Hence, you get to benefit from a more stable market movement. Basically, what this means is that you won’t have to stress yourself every minute over market changes since you can be certain that your property value is still the same, or even higher.
Secured Wealth Diversification
While I agree that investing in stocks is way easier than securing a property, real estate investment lets you enjoy bigger returns over time. When you invest in stocks, there’s not much that you can do about it – you can either be an active trader or a passive investor. However, in real estate, you can use your investment to earn passive income, grow your net worth, or use it as a means to secure another investment. Moreover, the real estate industry provides you with better protection in cases of market crashes and economic downturns.
Ways to Invest in Real Estate
Get Real Estate Investment Trust (REITs)
REITs are stocks specifically designed for investors in the Real Estate Industry. REITs are publicly traded on stock exchanges, these are typically companies that manage several properties including shopping malls, residential building, commercial establishments, hospitals, and more.
Investors of REIT earn by getting dividends on the share that they own based on the revenue of the REIT’s holdings. And, like any other stock, you can easily sell your shares at a higher price.
Having a Rental Property
This is by far the most traditional form of real estate investment wherein you make the investment and eventually lease it out to tenants. This is universally popular since it’s one of the best ways to generate passive income. It’s likewise not as stressful to become a landlord now than before since you can simply hire a property manager to take care of your property and manage the day-to-day logistics of the property. In this form of real estate investment, you’re technically building your equity and growing your assets since you’re incurring earnings from the rentals.
If you’re looking for a temporary investment and faster movement of money, then you may consider flipping houses. Flipping houses, in its simplest sense, is renovating an old / deteriorated property and making all the repairs to regain its property market value. To win in this option, you need to sell the property at a profit, there’s no other way. This is what I recommend for individuals who have a background in engineering, construction, or architecture since it will be easier for them to navigate the complexities of this business.
Buying your House
Many people step into Real Estate to buy their own house – that is typically the primary goal for the first investment, a family home. Buying yourself a house is probably one of the best investments that you will make in your life and trust me when I say so because it will be your home. Besides, before diving into other risky investments, I find no reason why you should not secure yourself a house first.
Now that you know the reason why investing in Real estate is a good idea, let’s now cover the basics:
Pay with Cash
In buying a property, it’s always wise to pay with cash. The simplest reason is that you’re doing it to grow your wealth and not to add more to your liabilities.
However, if you still prefer mortgage over cash payment, then it would be best to ensure that you can afford to pay the mortgage payments regularly. If you’re paying the mortgage and suddenly, your main income source diminishes or terminates, you will end up paying it more as a financial burden rather than an investment. Moreover, you can also be damaging your credit score, which is generally bad for your financial standing.
Yes, it’s true that you can have it rented so you get cash inflow – however, renters are not always long-term and you’ll even incur expenses to maintain the property, which can be an added liability. The worst part is, there is no assurance that your property will be rented all the time.
The key here is to start saving if you really want to get into the real estate market. Once you get that first property investment without the burden of liability, you can be certain that your wealth will start growing and accumulate over time.
Map your Incidental Expenses
With Real Estate, it’s not always black and white. Meaning, it’s not as easy as buying a coffee-to-go; you don’t just pay for a property investment and expect that it will automatically be yours. No, it doesn’t work like that.
When buying a property, there are tons of other factors that will add to your expenses. This typically includes taxes, legal filing, utilities, insurance, repair, and maintenance. These are just some of the considerations that you need to factor in when budgeting your investment.
From this point alone, you can already see that one needs to be financially prepared prior to entering the real estate market. It will really help if you did your part in preparing your finances properly, so you will not be overwhelmed with all the incidental charges that go with real estate investment.
Identify Your Goals
Once you have covered the financial requisites for your first property investment, it’s now important to understand your goals. Why are you investing in Real Estate? Are you planning to have it rented, will you be flipping it or will it be your home in the future? Identifying your goals will help you in making the right decisions as you go along in real estate – it will serve as your North star in pointing out which path to follow.
For instance, if you’re looking at settling down in the near future, then buying your first property as early as now would be the best choice. However, if you’re doing it to grow your income source, then find one that you can convert into rentals or one that you can buy and sell for a profit.
Do Your Research
Once you’re ready with your financials, the next thing is to research your potential property investment. Many people just decide on the location or the place on where to buy their property – however, it should really be more than that. For instance, you want to buy a home in a secured location with a peaceful neighborhood and a low crime rate. If ever you’re investing for commercial use, you should also check a good location that’s within or close to the commercial district to maximize access to potential customers.
Then there are the more important factors that you need to take into consideration including access roads, legitimacy of the land deed, and security – all of which will highly affect the value of your property.
Take the Baby Steps
Buying a property is already a big step in itself. So, it’s important to walk before running – as cliché as it may sound, but it’s a hundred percent true. You can’t expect that everything will go your way and become the next Real Estate mogul overnight.
In Real Estate, you need to start small. For instance, you would want to buy a small house first and start having it rented. Once you generate profits and save up, then you can move onto investing in the next property. As you become more familiar with being a landlord and managing a property, that’s the time to move up the ladder and consider getting a bigger property – and all this will not happen overnight or in one year. It takes time to grow your wealth in Real Estate, but the returns are certain and worth the wait. That’s exactly why you should only take it one step at a time.
Real Estate investment for beginners can be overwhelming especially if you’re unfamiliar with the industry. While it sure is a complex and a long journey, you can easily set your foot in the real estate market when you know the basics.
The Real Estate industry can be intimidating and overwhelming at first. The good news is that with the right mindset, a good foundation of knowledge, and drive, you can be on your way to growing your wealth in this industry.
Do you have any questions in mind? Leave us a comment below!