One of the main reasons that people decide to invest in real estate is to secure their future, and this can be a very effective way to do so, if you go about it the right way.
However, there are many people who dive in headfirst without any planning, preparation, or research, and these are the people who tend to fail.
You do not want to be one of these people. You want to be someone who brings in big returns and systemically increases your net worth year by year. Don’t you?
The key is in deciding what type of real estate investment you should make and understanding how you can make money from this investment.
Of course, you need to know the basics first.
What is a real estate investment?
Put simply, real estate investment is the act of making money (or at least trying to) by renting, flipping, or simply owning a property; be that a residential, industrial, or commercial one.
Residential investments are extremely popular as they are easy to manage and can be either sold or rented out for a quick profit with minimal effort involved.
How can I make money from investing in property?
This may seem like a very basic and obvious question, but many new real estate investors do not realize that there are several ways of making money from being a property owner;
Rent: This is a very popular way of making money from your real estate investments, as renting provides a steady and consistent income. Renting is ideal for those wanting a quick and ongoing return on their investment.
Holding: Many people forget that you can make money simply by buying and holding onto a property as the property’s value naturally increases. This is called appreciation, and the investor will be able to make a profit once they sell the property for a higher price than they originally bought it for. Holding is a good idea for those wanting a long-term investment.
Tax benefits: Put simply, once you purchase a property or multiple properties, you become a business owner and are therefore entitled to claim tax deductions. For example, any maintenance that you carry out, supplies you need, or even the cost of traveling to and from your property can be tax-deductible.
Interest: Slightly more complicated and more applicable for real estate investment companies rather than individuals, this involves loaning another developer capital to invest in a property and then earning interest on this loan. Effectively you are a bank for real estate investors.
Can I afford to invest in real estate?
A solid rule when it comes to investing is to never invest money that you can’t afford to lose; in other words, don’t mortgage your own home up to the hills just to fulfill your dream of becoming a real estate investor. Sometimes for beginners, it is better to start small and learn about the industry as you go; smaller mistakes are easier to rectify than huge ones that could result in you ending up in financial ruin.
If in doubt about what you can afford, look to a trusted financial source such as a Santee credit union, who are a non-profit organization that offer low rates on loans to its members.
What are your key responsibilities as an owner of property?
Being a real estate investor can be seen as an easy way to make a quick buck, but you must not overlook the responsibilities that are also involved. For example, ensuring that your rent is paid on time, taking care of any maintenance issues on the property, finding reliable tenants, to name just a few.
If you don’t think you want to handle the above, but still want to invest, then consider paying a third party to look after the day to day running of your property. Yes, you will have to give them a percentage of any money you make, but some people find this a small price to pay for peace of mind and less hassle.