Investing in real estate is a no-brainer if you’re looking for ways to build wealth. Investing is a big step, but it’s long been considered one of the best ways to earn more cash and make those all-important investments go further.
We provide you with some tips on how to create wealth investing in real estate.
Suppose you’re thinking of taking the leap – congratulations! However, knowing how to hit the ground running can be daunting if you’re new to real estate investing and unsure where to start.
That’s why we’re here to walk you through the essential steps, so you can set yourself up for success and build that golden nest egg you’ve been dreaming of.
Without further ado, here’s how to create wealth investing in real estate.
What Is Real Estate Investing?
First off, let’s start with the basics. What is real estate investing?
Put simply, real estate investing is the act of purchasing, managing, and then selling or renting real estate for profit. Buying and owning real estate is a significant investment strategy, but it has the potential to reap significant rewards.
Investing in real estate can be a pretty costly business. To create wealth, you’ll also need a fair amount of savings to get started.
However, if you’re already there, you’re almost ready to enter one of the most satisfying and lucrative business ventures.
You can also create significant generational wealth with the proper skill set. We all want to support our families as best we can, and investing in real estate is a pretty foolproof way to do it.
So how do you get started?
1. Real Estate Investment Trusts (REITs)
If you’re entering into real estate for the first time, a Real Estate Investment Trust (REIT)is a great stepping stone.
A real estate investment trust is a company that can either own, operate, or finances different properties and ventures. REITs give investors an excellent opportunity to gain exposure to the market without needing to commit to buying their property.
Pretty cool, right? Let us explain further.
These trusts provide an investment opportunity. You can invest in real estate in the same way you’d invest in other industries.
Essentially, all REIT stockholders will get a share of the income produced by the trust without actually having to buy their property.
You can buy shares in a REIT through your 401k, IRA, or brokerage firm. (See our article on 401k Real Estate Investment).
Historically, REITs deliver competitive returns and have a low correlation with other assets. They’re a great way to diversify your portfolio while reducing risk and increasing your returns.
Think of it as property investing without the actual property.
Wholesaling And Flipping
Next up, we have wholesaling and flipping. Most investing strategies involve this concept, and it can be one of the most lucrative opportunities out there. So let’s look at each of these concepts in a little more detail.
If you’re wholesaling, you’ll be purchasing a property (usually one that needs a little work). You’ll usually buy it for a low price and then inject some extra cash into the property to improve it, going on to sell your contract to another investor.
Wholesaling often requires little to no equity, and it has the potential to produce great results. You can build capital by essentially acting as a real estate agent.
When you produce a contract for your property, you’ll usually ask to be paid to connect property buyers and sellers.
Flipping is a little more popular. You’ll go out and buy an older, more distressed property, renovate it, and put it back on the market to sell for a profit.
With enough cash and the right skills, flipping can generate significant profits. If you flip and wholesale, you can generate substantial amounts of wealth.
It takes a lot of time and research, but either one of these options is a great way to kick your real estate investment journey off with a bang.
Private Equity Fund
If you’ve never considered a private equity fund before, we’re here to tell you why you should.
Essentially, private equity funds are an investment used to improve a portfolio. You’ll inject cash from outside investors and use it to acquire and improve properties.
If, as an individual investor, you don’t have the cash or know-how to get your hands on expensive properties, private equity funds can make these opportunities more accessible.
Let’s look at an example in action. For example, instead of putting $75,000 of your own cash into buying one home, you could put the same amount of cash into a private equity fund. This will then go towards purchasing a much more significant investment (say, a $5 million home, for example).
Your money will go alongside a much larger pool of investor capital, and you’ll also benefit from a management team with expertise and institutional backing.
So, don’t be fooled into thinking you can’t enter the big leagues if you don’t have the cash. Private equity funds can get you there and help you build that golden nest egg.
Becoming A Landlord
Last but not least is one of the most popular real estate investment strategies – becoming a landlord.
There are many ways to become a landlord. For example, you could buy a two-bed family home and rent it out; however, you’ll only generate significant profit if your overhead costs are low.
So you’ll need to ensure you’re charging enough rent to cover things like the mortgage, taxes, and maintenance.
Some landlords prefer to go down the ‘house-hacking’ route. With house hacking, you can purchase a building with multiple units, live in one unit, and rent out the other.
This is a great way to decrease living expenses while generating a profit. It’s a pretty low commitment compared to the former, and you won’t have to commit to taking long-term tenants if you don’t want to.
The Bottom Line
Investing in real estate is a big decision. However, with the right know-how and some cash behind you to get started, real estate investing can generate significant profits and help you build up generational wealth for years to come.
Remember: real estate investing takes many forms, so do your research, and choose the right option for you.
We hope this article on How To Create Wealth Investing in Real Estate can help you start building your real estate empire!