I happen to meet many young investors asking where they can put their surplus money and quickly build their business empires. An investment that can earn them massive benefits and become the next business gurus. But, the problem is how and where they can get the right information on any investment option.
Some lenders, such as Bugis Credit, help to some extent. I am sure you have met; if not, someone approached you and asked for guidance in investing. Today, there are many business guidance books all over the internet and national archives that offer step-by-step directives on how to start and run a different business empire. For instance, this article majorly focuses on how to invest in real estate.
First things first, real estate investing is buying, managing, selling, flipping, or renting housing property for profit. Most successful investors, such as Jacob Blackett, would tell you that real estate investing is one of the most effective methodologies of becoming financially independent. Such millionaires attribute their massive wealth through investing in the rental housing market. For example, Jacob Blackett owns about 1,000 units in the market. Do you know how much these units earn in a month? Enough to inspire you to invest in the market.
Benefits of Investing in The Rental Property
It is not guaranteed that every beginner will become a millionaire in a single night, but investing in real estate comes with numerous benefits for anyone who takes the risk. The benefits include;
● Regular cash flow:
The rental housing market is one of the markets that offer steady cash flow. Once you buy the property and rent it out, provided it does not need many repairs and expensive utility maintenance, you can sit and enjoy the returns. The cash benefits come in handy, especially if you are on a retirement plan.
● Security against market inflation:
Unlike other businesses such as stock markets, which can be negatively affected by global macro factors, the rental market will benefit in such moments. Its value appreciates over time, and if you decide to resell it, you will make massive returns on your investment.
● Tax benefits:
Investors in the real estate industry enjoy the benefits of low tax imposed on their property and running the business. The benefits include; depreciation, affordable mortgage interest rates, flat property tax, and homeowner’s insurance.
- Tangible asset:
You can see, visit, and renovate your property, unlike bonds, stock, and mutual funds, which are only controlled by the government and other market factors.
After knowing why you should choose to put your money in the rental housing market, you need to know the steps to take and make the investment the source of your wealth. The following are some of the tips you need to get you started.
1. Come Up with Your Investment Strategy
In any business, you must choose your unique strategy. The same applies to real estate investing. It would be best if you planned how to start and run your business. Alternatively, successful investors come up with more than one strategy and balance them to create more profits and become millionaires without much hassle. The following are the most common real estate strategies that you can choose from;
● Buying and holding:
This is an investing strategy where the investor buys the rental property, holds on it for a more extended period, and finally resells it at a higher profit. The approach is based only on property appreciation over time.
● Fix and flip:
If you are looking for quick cash, or you don’t have enough money to buy a new property, then this is your strategy. All you need to do is buy a distressed property, renovate it, and list it in the reselling market. You will still make a profit from it.
● Wholesaling in real estate:
This strategy involves an investor getting a contract from the seller to market the property and assign it to the buyer. Once the property is sold, the investor will earn a commission from the deal.
● Long-term (traditional) rentals:
This is where you buy a residential property and rent it out for several months or years.
● Short-term rentals
The rental property is only meant for people who only rent it out for a few days. Rent is only paid per night.
● Buy-Rehab-Rent-Refinance-Repeat (BRRRR)
This is the last strategy on the list. As the name suggests, the techniques involve buying a run-down property below its market value, renovating it, and renting it out for several months as the owner refinances another property. The investor repeats the process and buys more properties in the market, creating more wealth. This is a unique plan for investors with little capital to invest.
2. Assessing Your Financial Capabilities
The amount of money you need to invest depends on the investing strategy you choose. For instance, the buy and hold strategy will demand more finances than the BRRRR plan. Additionally, the method of payment also determines the amount of money you should save and invest. Cash payment means you will save a lot of cash before thinking of investing. The point here is: you should plan well and come up with a strategy that works better with your financial abilities.
3. Searching for Property
This is when you have to start looking for the property to buy. There are various methods to use when looking for investment opportunities, including;
- Driving around looking for a ‘For Sale’ sign placed in front of the house. You can also search for grossly neglected properties, which have uncollected mail and broken windows. Owners of such properties would offer an affordable price.
- Working with your friends and relatives and informing them that you are looking for a property to buy. There is also an extensive networking strategy to find a property like attending real estate trade shows, visiting open houses, and many others.
- Working with real estate agents will provide all the reliable information on the multiple listing services (MLS).
4. Conducting the Investment Analysis
This is an integral part of beginners to analyze all the related factors in the market. Such factors may include the property’s price, population growth, the job market, transportation features, proximity to amenities, and security. When conducting your property analysis, you should also look at the hidden factors such as price-to-rent ratio, cash flow, and cash on cash return. This will help you determine if you will make a profit or suffer a loss.
The Bottom Line
Investing in real estate is one of the most comfortable options for creating financial independence. A beginner should only be prepared and have all the vital information needed before starting the investing journey. Although the article briefly tackles the steps on how to become a real estate investor, it should also serve as a guideline to help you make wise choices. Please work with experienced agents who will give you a face-to-face process to invest.