When people invest in real estate, they look for capital appreciation of the property along with the rental income to get the return on their investment. It’s a fact
Is investing in real estate a good move? If so, then at what age is it best to invest?
real estate? More and more people are discovering real estate investment opportunities and the rewards that come with having an investment property.? Why do we keep hearing about people making money in
Andrew Carnegie said, “90% of all millionaires become so through owning real estate.”
What is a real estate investment?
Real estate investing is buying a property to own and manage and to rent out to generate an income. The property can be an apartment, house, shopping mall, or even shopping center. Any brick and mortar is real estate and can be turned into an investment property. The objective of investing is to make more money from a property than its expenses.
Investing in real estate is more than just buying, renting, or selling. It is also about building value in the property through either renovations, additions, or inflation.
Why invest in real estate?
Think about every building that is standing, being developed, or being planned. All of those add up to real estate’s huge industry. The commercial market in the US alone is over $10 trillion and every building included is part of the real estate industry.
So what does this mean? A never ending demand from two parties – people and businesses. The demand and competition for housing is eternal – people will always need a home, a huge incentive for buying an investment property. Likewise, any business will need a brick and mortar (yes, even online companies) and will continue to contribute to the massive commercial market, another incentive to join commercial real estate investing. So, ? Yes! These demands alone can vouch for that.
An investor wants to put their money somewhere that will constantly give them returns – which is where investing in real estate comes in.
How to make money in real estate?
One great thing about real estate is its hedge against inflation (when the value of goods increases and gets more expensive). As a real estate investor, you benefit from inflation. That means rent increases, home prices increase, and money in your pocket increases. When the value of a home increases, that means the house has appreciated and appreciation is a great bonus to real estate investing.
There are different ways to making money in real estate. Buy-and-hold properties is buying a rental property, and collecting rent every month. This essentially means becoming a landlord but that depends on if professional property management is used. This is a good long-term investment because income is stable and there is a chance to gain appreciation.
Fix-and-flips are a great way to make money quickly. This is finding a property that needs work, renovating it, and then selling it.
Collecting rent every month or selling a house are some of the obvious ways to make money. However, there are other ways to make money in real estate without doing a lot of the work.
Passive investing means investing in real estate without doing any of the dirty work. You look for investors buying an investment property and lend them money to renovate the properties. In return, you get interest payments every month and a final payment at the end of the term. This is called a first trust deed investment because the interest is protected by the property.
Another passive way to make money in real estate is by working with a real estate company, a syndicator, which is buying an investment property. You can buy a share of the property and you get a share of the rent and selling price.
Real estate is a good investment, but is it the best?
There are different ways to invest other than real estate like stocks, gold, bonds, etc. Determining what’s best depends on risk, required capital, and other factors. There are several advantages that come with buying an investment property.
1) Risk – With real estate, you can control risks more so than with stocks. You can look at how residential and commercial property investments are performing and at their past performances to understand trends and patterns. Stocks are more difficult to understand.
However, to a certain extent, an investor can understand the influencers of a real estate market more easily. For example, location and tenants can be analyzed before investing and investors can pick the optimal options to ensure returns.
2) Taxes – There are benefits to having a rental property. The interest on the mortgage, operating expenses, property taxes, insurance and depreciation are all tax deductible. The deductions depend on rental income but expenses cannot be more than income, which is why positive cash flow is so important.
3) Required Capital – There are ways to make money in real estate without having to actually spend money, such as wholesaling. Trading is another option that comes with real estate because the assets are tangible. Real estate is also one of the few investments in which you can gain ownership with little or no money down.
While investments can be very liquid, real estate brings diversification to an investor’s portfolio. The more diverse a portfolio, the less likely an investor will get burned if one type of investments doesn’t perform well.
So, is real estate a good investment?
If you’re still asking yourself “real estate,” then maybe we need to tell more . . .,” or “why invest in
When buying a rental property, there is always the option to move in the property later as a personal home. Likewise, if you’ve moving to a new home, you could always rent out the old house and turn it into an investment property. The income from that investment property could cover its own expenses plus be used toward the mortgage payment on the new home. This pattern can continue, which is how many investors end up building a huge real estate investment portfolio and become very wealthy.
As for age….
What is the threshold for being able to invest and make money?
The truth is, there isn’t one. There is no age or degree or amount of money that is required in order to begin investing and enjoy the income. There are ways to begin investing now if you understand the market. This blog is not meant solely for those in their twenties. It is meant for anyone who wants to begin investing and is worried it is too soon for them. It is meant for you.
Your Worries and Their Solutions
The first thing that came to my mind when learning about investing was “I’d love to invest but I don’t have any money.” And while it’s valid to say that you need to spend money to make money, you don’t need a huge amount to invest. Just a little bit. There are different things you can do with “small” amounts of money. 1) You can apply for a loan and only need to pay a down payment of 3.5% to obtain a property. The property could be a flip which you live in first, fix it up and then sell it. 2) If you can’t live in the property, which means you won’t qualify for the loan, get money from a hard money lender and obtain the property and materials to fix up and flip the house yourself. The FHA has program which means you can get funds to purchase and renovate the property.
Another worry is the lack of education, knowledge, and time you have. Well, it’s 2016 and we’re swimming in resources. You’ve taken an interest now rather than later and you’re clearly doing your research so good for you! Educating yourself about this field and smart investing has been simplified for this generation. There are so many online sources that can teach you about investing or anything else for that matter, at your very fingertips. Once you do decide to invest, there are numerous tools to help you optimize your investments. For example, is becoming widely used because people want to be able to predict the future numbers. Mashvisor allows you to perform a and gives estimated costs, incomes, returns and strategies for making the most out of your investment.
As for time, you need to know two things. First, the right time to invest is now if you understand the market and never if you don’t. Secondly, you have more time now than you will in the future believe it or not. Actually, starting sooner means being able to earn more over time. It also means having time to recover from mistakes. The most time you’ll ever have is right now.
Things to Start Doing Now
If you haven’t already, start building your credit. If your credit is messed up, start fixing it by taking advantage of the credit repair resources. It is during that time you can fix up properties or work in . These types of activities don’t necessarily require high credit scores. Wholesaling can actually be a very good solution if your credit and financial situation are not doing well, but to make money, persistence is required.
Another developmental step is building relationships and networking. Finding mentors and maintaining your relationships will teach and help you more than you think. Observation is the easiest and sometimes the best way to start. You can get hands-on training by watching landlords and real estate investors work. If you can’t get the face-to-face interaction, you can network with real estate experts online asking and answering questions on certain platforms.
You’re Off. . .
The most important thing to any goal is staying motivated and staying open to learning more and more. Don’t get discouraged if investments don’t work out well or if you see others excelling while you’re not, baby steps are good. Take advantage of as many resources and can get to help you before and after investing. You will get more comfortable with making decisions and expanding with time and with every step you take. Good thing you started early.