4 Secrets to Building Wealth with Real Estate

Written by Posted On Thursday, 16 August 2018 13:01

Historically, real estate investing has been one of the greatest sources of building wealth. And it is even possible to invest in real estate using no money. For instance, you can take out a home equity line of credit, trade cars or other fixed assets, enlist the aid of an investment partner, secure financing through lease options, and more. However, in order to build wealth using real estate investing, it has to generate revenue, which means whether you own a vacation rental, a commercial rental, or a residential rental, your outgoing expenses must be lower than your income.


When it comes to building wealth with real estate, some of the most common strategies to do so include: you can flip real estate, purchase short sales, purchase a vacation rental, or you can simply buy and hold real estate for the long run until it increases in value, also known as generating passive income.


Real Estate Flipping

Though there is money to be made in flipping real estate, you could wind up taking a loss if you don't invest in the right property.


According to successful real estate flippers, the secret to being lucrative at real estate flipping is to go after the most unattractive homes in good neighborhoods, which can be done simply by networking with a real estate agent in the area. You should also know how much the home will be worth after repairs, which can be determined by inspecting the property on-site as well as enlisting the aid of an experienced contractor.


Short Sales

When a homeowner is behind on their mortgage, but they aren't in foreclosure, it is possible to purchase the property for lower than the amount that is owed on the current mortgage, also known as a short sale. Because the mortgage is in default, it means the financial institution is stuck with a bad investment; therefore, they will typically allow you to negotiate the purchase of the property for a lower price, which can result in a pretty hefty profit once the sale is complete. However, be warned, a short sale can take some time to complete, but it is worth it for the yield.


Vacation Rentals

Vacation rentals have the potential to generate a large sum of money and accumulate a steady passive cash flow. However, the secret is to invest in a property in a high-traffic tourist area with increased demands for short-term rentals. You should also be sure to go an extra mile for renters staying in the home, which will help ensure the property stays rented. And, should you decide to go with a management company, be sure they are on the same page as well. You may also consider getting a home warranty plan to protect your investment and save you money in the long run.


Buy-And-Hold Residential Properties

The most traditional way of investing in real estate is to purchase buy-and-hold residential rentals. Again, the secret here is location, which will not only affect your ability to increase your asset value over time but also how quickly you rent your property. However, going the traditional route also means you have to have cash on hand for the down payment, and you must be willing to hold the property for a long period in order to reap any real value.


Another point to note is if you are purchasing a current income-producing property, then it may be possible to purchase the real estate with no money down.


In the end, there are many ways to make money investing in real estate, some more traditional, while others are more creative, but they each require you to do the research and put forth the effort to make it happen; however, when done right, it can enable you to make a lucrative career in real estate.

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