Real estate has historically been proven to be a reliable and highly rewarding investment. Many of the wealthiest people make a huge chunk of their money from real estate.
Why is investing in property so lucrative
It’s not only a true source of passive income, but generally, the price of housing appreciates over time. Even when there are slumps and market declines, after a while when things pick up, so does the price of property.
There’s also no shortage of financing. If you can show the banks that you’re credit worthy, they’ll extend loans to you and finance the purchase of a second home.
Unlike investing in stocks, mutual funds, bonds, etc. investing in property seems more satisfying because your investment is a physical product. You can always live in the house you’ve bought.
Furthermore, property rises with inflation because when inflation rises, so does the price of your property. Unlike other financial instruments, there is very low volatility with real estate investing. Don’t expect overnight windfalls, unless you sell your property way above valuation to an eager buyer.
Your returns on investment will take place in the long term from rental income… but this is far more profitable than dividends from shares, etc.
Real estate investing tips
Make sure you have no personal debt. Do not invest in real estate if you still have student loans, credit card debt, etc. Settle off all bad debt first. You don’t want to overextend yourself.
Being cautious with real estate is even more important because you can lose your entire investment if you take on too much risk. The recent Covid pandemic affected many real estate investors who bought lots of properties to offer Airbnb accommodation to tourists – but suddenly there were no more occupants.
This systematic risk made many go out of business. So, you’ll always want to err on the side of caution and not take on more risk than you can handle.
Create a business plan and figure out how you’ll make your monthly payments. The truly wealthy are able to pay for property in full though most still take loans because the interest on loans pales in comparison to what they can make by investing in other ventures.
That said, should dire times descend upon them, they’ll be more than capable of paying off the house with the money they have. The average investor who is not in their income bracket will struggle. So have a good business plan and follow it.
When choosing a house, buy it in an emerging neighborhood which has easy access to schools, medical facilities, shopping malls and parks. You want a family-friendly neighborhood that has a very low crime rate.
Time the market and buy when the prices are low. Generally, if you’re taking a loan, the loan will only cover the valuation of the house. So if the owner is asking for more, you’ll need to pay out of pocket. So, you’ll want the valuation to be done when property prices are on a decline. This is why they say that the most opportunities are found when the economy is in a slump.
Do not rush to flip the house you’ve purchased. Sometimes if you wait a year or two, you can almost double your profit if there’s a market upturn.
Another point to note: a house is only an asset if you can cover its maintenance costs. If you’re financially stable, you can easily hire professionals to fix the plumbing and other issues that crop up.
This is part and parcel of owning property. Renters do not cover upkeep costs. You will need to. Many property owners have DIY skills and can do basic repairs so that they don’t need to hire others.
You need to ask yourself if you’re cut out to be a landlord. Can you make repairs on your own… and if you can’t or don’t wish to, do you have the funds to hire a professional?
Another tip if you’re new to real estate investing, you may wish to get a mentor… and it must be someone who walks the talk and not someone who spouts untested theory. Taking a real estate investing course from a pro will open your eyes to the opportunities available, and also steer you clear from the possible pitfalls.
Decide before hand what type of property you’ll get. Will it be residential or commercial property? What’s the location? Location is EVERYTHING when it comes to real estate investing.
You need to know your target market, the type and size of the property you’re getting… and even the zoning laws. Some sites are zoned strictly for residential properties, whereas others allows for both residential and commercial properties.
Will you be able to pay for the property yourself… or will you get financing? And if you do get financing, can you make the monthly payment if you don’t have tenants/renters? You’ll also need to be aware of the rental yield. What rent are the properties in the area charging?
You must be able to generate an income from your property within months of buying it. Money loves speed… and the faster your property yields rental income, the easier it will be to make your loan payments and generate a profit.
You’ll need to ask lots of questions and do the necessary legwork BEFORE buying any property. This is a major investment and should not be approached in a slipshod manner.
Investing in real estate is a fantastic way to grow your money… but you must do your homework and have sufficient funds/financing.
If you do the necessary legwork and you’re financially stable, you’ll be able to profit from this proven method of growing your wealth. This is one of the best ways to grow your income exponentially.
“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.”Robert T. Kiyosaki