According to the U.S. Census Bureau, real estate has consistently increased in value from 1940 to 2006, then proceeded to dip and rebound from 2008 to 2010 and has been increasing overall.
Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate ultimately for profit. Being a real estate investor isn’t always glamorous but it’s a great way to make your money work building your wealth with proper maintenance and upgrades’ as needed over the long-haul. There are several ways to consider investing in real estate, buying properties with the intention of renting them as a way to generate income, 1031 Exchange or, buy, fix, and flip to other buyers. All involve your due diligence; the old adage of Location, Location, Location should be adhered to.
When considering investment options you can put funds into a 401K, buy stock in companies you know about and let them sit in your brokerage account or spend a great deal of time hedging with puts and calls, all the while hoping you make the right choices to increase your personal net value.
On the other hand you can invest in a rental property of multifamily buildings or single homes. Ask yourself if you’re ready to take on the responsibilities of becoming a landlord. There are many responsibilities for the individual putting on that hat, it’s not as simple as purchasing the building and renting the space. When the furnace stops working in the middle of the night, it's you who gets the phone call. If you have the skills and like handyman work as well as helping people find safe dwelling this is for you. Not so handy you may need a property manager which, of course, affects your bottom line which is why you must make the effort and take the time locating that perfect building.
The first and foremost attraction to real estate investing is cash flow; the remaining monies at the end of the month when all obligations are met can be appealing. Appreciation is another way to capture profits upon the sale of your property. Regardless of fluctuating real estate markets, over time the values do climb higher when property is held long enough and structure has been kept in good condition.
Real estate can be a powerful investment, but only if you do it right. It’s important to locate deals that work with what you want to do, buy in the right neighborhoods, prepare to treat the venture as a business and run it as such. Perhaps the biggest difference between rental property and other investments is your comfort level with your obligations and the time you must devote to caring of your investment.
To simplify and understand the big picture of real estate investing, think about it terms of Monopoly. An experienced Monopoly player (and winner) will tell you the best possible way to make a return is to buy as many properties as you can. The same applies in real life; you must be willing to assume some level of risk to get started. Similar to Monopoly, start building your collection of properties and begin collecting that rent money ASAP. Also with proper vetting of your tenants and some financial resources set aside for unexpected expenses such as lost rental income, needing a new roof or heating system you can enjoy the rewards of ownership.
Where do you begin? Seek out an experience real estate agent with thorough experience of the market in your area. While there are a number of ways to get started such as borrowing the funds needed to purchase a property, the wisest move is to take the time and save the funds for the transaction; or, at the very least, save for a substantial down payment. You can also seek out multi-family properties where you can live in one unit and the rental income from other units cover the mortgage payment.
Don’t forget to research and understand the rules and regulations in your town and state. Doing so may help you find investment opportunities that others don’t see and it will give you an edge in the marketplace. When you get started, think long-term, not just the immediate present. Just like Monopoly, it may appear best to buy utilities at first, but if you can obtain all the railroads, those train stations will be a larger return on your investment. And always consider location, location, location. While it might be tempting to purchase Baltic and Mediterranean Avenue, these properties aren’t beneficial in the long run. It’s unlikely to bankrupt a fellow player unless they are already on the path of financial ruin. Similar to the board game, search for properties located in areas that will maintain their value even during times of recession.
With all the real estate investing options available, the average person is going to get their first real estate ownership experience the traditional way, by purchasing a home. Take a look at your personal wealth, outright ownership of a home (without any debt against it) is one of the best investments a person can make.