There are a lot of ways to invest in real estate and a lot of reasons to do it. Let’s start by examining rental real estate.
The concept is pretty simple: you purchase a property, you rent it out and the tenant pays the mortgage for you (plus a little extra), in time you build equity as the property appreciates, and then you ultimately own the property free and clear.
That is really putting it into a nutshell, however, that is the basics of how it works. Typically you put a little money down and finance the rest, although some people pay all cash for their rentals. Either way, you can build a stream of income and benefit from having your tenant pay you for the property.
To build wealth with rental property you will need to scale and buy more properties. It is really hard to build significant wealth and cash flow with one property. Imagine owning 20 units free and clear by the time you retire? What would that mean to you?
For many people it would mean freedom! Freedom to enjoy life in retirement and help others out. It could also mean retiring early and having more time to do the things you love!
Tax breaks make real estate an excellent asset class to invest in. For starters, you get to depreciate your properties! That basically means that the IRS looks at your property as something “wearing out” and losing value. You get to write off the “loss of value” as an expense on your tax return! Here’s the real kicker though…..your property is probably not actually losing value in the marketplace!
Think of it like this, what has the price of an average 40 year home done over those 40 years? Has it went up? In most cases- yes! So imagine what the homes or buildings you are buying now will be worth in 30-40 years!
The second most common way to make money in real estate is by flipping properties. This involves buying property and then selling for a higher price. Sometimes this means buying it and remodeling it to bring it’s value up and then selling it for more than what you have invested in it.
While we do not focus on that style of investing at Investucate, there is nothing wrong with it and many people make excellent money doing it. You will need to be educated on your market to avoid paying too much and have a good network of contractors to work with.
Real Estate is an awesome asset class to invest in! My goal is to teach you more so you will feel comfortable enough to get started. I will shoot straight with you and tell you about the mistakes I have made and what I have learned. To follow and receive my blog posts, don’t forget to sign up on the homepage!