Building Wealth with Real Estate
Have you ever thought about real estate as a part of your investment portfolio? Worried that now may not be the right time to invest? It is always the right time to buy real estate! Sure there are some market conditions that are more advantageous for a buyer but in general, if you purchase the right type of property, at the right time, in the right location, there is rarely a wrong time to buy. Building wealth with real estate is smart, obtainable, and can yield short-term profits and longer-term gains.
Real estate cannot be lost or stolen, nor can it be carried away. Purchase with common-sense paid for in full, and managed with reasonable care, it is about the safest investment in the world.
-Franklin D. Roosevelt
Buy Low, Sell High
The golden rule is to buy low and sell high. That does not mean that the right home at a premium in the right neighborhood will not be a great investment. It boils down to establishing your goals. Are you looking for short-term gain, or are you on a long term trajectory to create passive income? I am a believer that real estate is a long gain.
Creating passive income is a great way to grow your money! Investing is a major part of building wealth, but it can be intimidating to start. It’s good to remember that people will always need somewhere to live. With inflation and a growing population, property values will continue to climb.
Here are a few things to remember if you are considering getting into the real estate investment game.
Pick Your Strategy
When looking to build wealth with real estate, there are a few key strategies and types of investments to consider. Each will yield different financial gains. Some are short-term opportunities, others better for long-term gains.
Determine Your Risk
What are you willing to risk for a higher payout? This determines the type of investment you go with. A higher-risk real estate investment could be buying a home and flipping it. Lower risk would be buying a home in a desirable school district to hold long term as a rental.
Rental Property
In many US markets, rentals are in short demand. This can be a great long-term strategy. If your rental property has a high occupancy rate, the monthly rent could pay off the mortgage. Many use this strategy to create retirement income; once the mortgage is paid, a large portion of the collected rent would be passive income. In addition, as time goes on, your rental homes will be worth more money, giving you the ability to leverage the equity to make other purchases or cash out of the investment for liquidity purposes.
House Flipping
Buying homes that need repair, renovating them, and then reselling is a great way to generate short-term gains. I would caution that flipping homes needs to be done with care, and not all renovations are good renovations. Costs on a flip project can escalate easily. Be prepared. Used good quality contractors. Work closely with your real estate broker. Look at the maximum sales price that the home could yield once renovated. I see a lot of homes where renovations went sideways and/or were done poorly. These flippers rarely make the profit they anticipated or the profit that they could have made.
Buy and Hold
Real estate tends to gain value over time. Whether it be raw land, homes or buildings that are in need of repair, buying and holding to reap the rewards of time can be an option.
House Hacking
This is where you take a portion of your existing home and create rental income from it. It could be a basement or a garage apartment. You could create a long-term rental property or a space used for a vacation rental, such as an AirBnb rental. Some homes are really conducive for this type of investment. The rental income helps pay off the existing mortgage and/or can generate some additional passive income.
Looking for a great resource to learn more about real estate investments? I love Bigger Pockets. Ready to see what is available to purchase in the Portland area, start here.