There’s a reason why the richest people in America build their wealth through real estate. It’s less risky than stocks, it goes up in value over time, there are great tax benefits and it’s a physical thing, unlike for example, cryptocurrency. We all know why real estate investment is a smart move, but it might still be confusing as to how exactly a person could build up wealth real estate investing over time. That’s what I’m going to through with you today. We’ll talk about the different ways you can build wealth with real estate and how to get organized to tackle your first venture!
Invest in a Property, Receive Rent Checks
Buying a property and renting it out is probably the easiest of all the forms of real estate investment – there’s a reason it’s considered “passive real estate investing.” You can rent a single family home, a multi-family home, a mobile home park, part of an apartment complex or commercial/mixed use spaces out to tenants. Your tenants will help you pay back the mortgage and then you can start to make a profit. With all forms of real estate investment, it takes time. Don’t expect to get a return a year later.
Investing in a single property to rent is also a great introduction to the world of real estate investment. You yourself have probably rented a space from a landlord or a property management company. You know that as a landlord you’ll be expected to fix leaks, deal with tenant complaints and possibly get delayed payment. While these problems are somewhat bothersome, it’s less involvement than other real estate investment options.
Flip a Home
Flipping a home is an investment with a shorter time frame, but is ten times the work. However, by buying low and selling high, you’ll not only get a return on investment more quickly but you will also make a larger sum of money on top of that. There are many different ways you can flip a home. You can find homes that are in poor shape and fix them up. You can buy homes that are in foreclosure. No matter how you acquire the home, just know that you’ll need to get “into the weeds” with this project. As in, this isn’t a passive real estate investment. You’ll need to fix the place up yourself, buy new appliances, replace drains and pipes, for example. Or, you’ll need to hire a team to do this for you, which is an added cost. (Luckily, we have a whole section that discusses flipping and how to find good contractors.)
While you’re selling your home, you may be able to offer your buyer financing. This is something you can offer to your buyer when banks are not giving your buyer a loan either for bad credit reasons or due to the economic climate at the time. Offering seller financing for the home can speed up the process and at the same time could build wealth through real estate investment.
Wholesaling Properties
If you are not interested in fixing up a property, then wholesaling pieces of property may be for you. You can make money from wholesaling property by bringing homes that are in poor condition to investors who are interested in fixing it up. You’ll find homes that are in poor shape, figure out what needs to be fixed and include that estimated figure in your pitch. After that you convince investors to buy. This could be a good stepping stone to flipping homes yourself.
Where to Begin
First, you should come up with your goals and expectations of yourself in order to build wealth through real estate. Which form of real estate investment interests you the most? How much work are you willing to put into it? Are you treating this like a side hustle, full time gig, or do you hardly want to spend any time on it at all? Once you’ve figured that all out, think about how much money you’d like to make from your venture in the next 5 to 10 years. From there you can do the math to see how much money you’ll need upfront.
You should also consider if you want to work by yourself on this or with a partner or team. Sharing the responsibilities of flipping a home for example, is much less daunting compared to having to accomplish it all on your own. Working with others also allows things to move much more quickly to build you wealth investing in property development. It all depends on what you want to get out of it.
Building wealth through real estate investment is never easy. There will always be challenges and problems you’ll need to get through. Prepare to spend more money than anticipated. However, as I mentioned earlier, there’s a reason why the 1% invests in real estate. It won’t get you a quick dollar, but it can get you a large amount of money over time. It’s just a matter of having patience, resilience and understanding the industry.