Why Real Estate Investing is the Best Way to Become Rich

In fact, real estate is one industry that has most likely produced more wealth than other industries. Despite this, some people remain skeptical about real estate. Are you one of these skeptics, and you are interested in finding out if investing in real estate is a good idea? 

Continue reading to learn why real estate is considered the best way to build wealth. 

Significant Capital or Credit

Even if you’re just starting out, you can become rich through real estate, because it doesn’t require significant capital or high credit. With just a few hundred dollars, you can go for distressed properties or lower-priced homes and flipping contracts. Of course, with low capital, you’d have to find other investors or hard-money lenders who can help you push deals.

Plus, even if you have a poor credit, you can still move high up the ladder in real estate if you are committed. In fact, many successful and wealthy real estate investors started with poor credit or even no credit. 

What’s more, most people get deterred from real estate because of the misconception that major assets are needed before purchasing a piece of property or securing a contract. While you don’t need major assets to get started in real estate, you have to have an understanding of how creative financing works. 

Several Profit Avenues in Real Estate

Another reason real estate is regarded as the best way to become rich is because there are several ways through which money can be made in real estate. With stocks, you can only make money if the value of the stock appreciates, and you sell it at the best market time. 

Here are some of the ways to turn profits in real estate

• Rental Income: Also known as buy-and-hold investment, rentals are one of the popular methods for making money in real estate. People will always need a place to live and work, and that means you can keep making money from a rental property. 

However, before investing in a rental property, you have to conduct thorough research, keeping location, property type, and your budget in mind. Location, in particular, is everything when it comes to real estate. It determines your ability to quickly get tenants for the property, as well as how the property’s value increases overtime. 

In fact, the location is of more importance than the current state of the property in question. This is because the location is a constant; you can always renovate the property, but you can’t change the location. 

• Buying Low: If you can buy a property under market value, you can turn an instant profit. You can get a property at below market price in the event of a foreclosure, quick sale, or if you have excellent negotiation skills.

• Lease Options: This is another great way to get involved in real estate without having great credit or a significant amount of capital at the outset. This involves leasing the property with an option to buy, and it works best when the real estate market is on the uprise. This is because you set a price to purchase the property at a later date, regardless of the market value of the property at that date. 

• Contract Flipping: What this involves is bringing a motivated buyer and distressed buyer together for a sale. Once you’ve identified the buyers and sellers beforehand, you can enter into a contract confidently.

• Vacation Rentals: This is quite a lucrative method of turning profits in real estate. If you’re interested in building a substantial stream of passive income, vacation rentals are a great idea. The key is getting a vacation rental property in a tourist hotbed. 

• Equity Increase: If you take out a mortgage to finance a rental, you’d be increasing your equity with each mortgage payment you make. If you put down 25% on a rental, and your mortgage payment stands at 33%, the 8% ( 33% minus 25%) comes from paid rents, and it increases your net worth monthly. 

• Leverage and Returns: Regardless of if you have a 20% down on a property, the rental income you receive will still be based on 100% of the property value. So, if your property is worth $200,000, and you charge $1500 in rent with $1000 going on mortgage, taxes, and fees. After making these payments, you’d still have $500 profit on the $40,000 you paid down. That’s $6000 a year! The bigger the leverage, the bigger your returns.

Real Estate Leverage

Real estate leverage is less riskier than stock leverage. Stocks, especially currencies and penny stocks, are volatile. Ups and downs in the stock market can greatly affect your income, and if the shares go down, your whole account balance could even be wiped out. 

In real estate, however, you can make deposit on a property with little capital, and rent it out. If you have tenants in your property, you never really have to bother about the ups and downs of the market. As long as your tenants pay on time, and you are able to keep meeting your monthly mortgage repayments, your stream of income is safe. If there are no tenants in the property for a while, you will have to make the mortgage repayment yourself. Though getting the money to make the payment yourself might not be easy, this is a far better option than seeing your entire trading account wiped out. 

Bottomline

The truth is how to make money from real estate investment depends on YOU. The profits from your investment will be as a result of your commitment, research, effort to renovate, screen for proper years, and keep the property up in the long run. Even if you have a negative equity, real estate will provide you with monthly rents for covering the mortgage. And in an economic turmoil, when banks deny first-time buyers mortgages and houses get foreclosed, you will have more potential tenants. So, irrespective of if the market is good or bad, you can keep cashing out in real estate. 

Casey Ryan Richards
October 13th, 2019