Everyone’s desire is to create wealth for his/her generation even with a limited supply of resources. Through real estate investment, it is possible for anyone to support multiple generations in economic and social opportunities. Reason being… if there’s one thing we can all agree on, it’s “you can’t make more land.”
Investing wisely in real estate can really help anyone’s financial situation and if held on to, it can help produce generational wealth. Disclaimer: Yes, investing in real estate, just like any other investment opportunity has its risks, but it can help you gain long-lasting wealth without a doubt. It’s been said that 90% of millionaires & billionaires made their money in Real Estate, now that might be a far stretch over the last 10 years because of the growth of the tech and financial industries, but I would still argue real estate is one of the more stable investments anyone can make. The beauty of investing in real estate is that you have the power to control more pieces, you can see it, feel it, make improvements, and use OPM (other people’s money) to acquire more of it. Below is some more information on how and why you should heavily look into investing in real estate.
Assets and Appreciation creates a hedge against inflation…
Acquiring a property means having something of value that you can sell. Both residential and commercial properties are expected to increase their monetary value over time. Every land owner makes more money when there is an increase in the cost of living in a country. Truthfully, those who worry about inflation are those that own no assets. Imagine buying a land worth 10,000$ in 2015 and selling it for 20,000$ in 2018 due to inflation? That is where the profit speaks! In addition, any rental property allows you to build equity and get passive income at the same time (Who wouldn’t love this?)
Now as an investor in real estate we never want to bank on appreciation it’s just the icing on the top, we always invest for steady cash flow. Cash flow is an important concept in real estate investment, the concept revolves around getting a steady income that builds over time. This can be achieved by owning a rental property that gives you direct income that can continuously increase annually over time. Your cash flow simply put is your total income monthly minus all your expenses.
Cash Flow = Total Income – Total expenses
As mentioned, supporting generations of your family after you is another reason for investing in real estate. Owning a property lets you pass on a wealth-generating asset to your children or heirs. This could be commercial or residential. Your family would still be able to reap the tax benefits as well as cash flow while keeping the memories you’ve built in the family legacy.
Different Ways to Invest in Real Estate…
Clearly, putting money into real estate and becoming a direct owner has many benefits. Most times I’m told by someone they would love to invest in real estate but just don’t know how or where to get started. I want to uncover some of the types of ways anyone can get started investing in real estate.
- Family Residence (SFR) Investment. Leasing out a single family home to a tenant offers the advantage of securing 12+ months’ worth of income to what some investors may call a “quality tenant” because they aren’t in an apartment and take more pride in your home.
- Duplex, Triplex or Quad Investment. These are great because you will have a good cash flow when there are more units that are for rent under one roof. Depending on cash flow and rents, in a 4-unit complex, one tenant vacating a unit will not affect the income from the property as long as the other 3 units are still occupied.
- Apartment (Multifamily) Residence Investment. Having a building with at least five units allows you to significantly boost the property’s value through good property management. Within 3-5 years you can really see an increase in cash flow and appreciation, allowing you to leverage and scale even quicker.
- Mixed use Investments. A strip mall with multiple businesses falls under the commercial retail residence category. Buying a commercial building with retail business space under and a couple residential units above allow you to secure both long term (3-5-10 year leases) and short term (12+ month leases) on the units and cash flow.
There are other types of property investment besides the four. You can also look into investing into commercial spaces; industrial property for businesses such as manufacturing; self-storage facility; mobile home parks; or even short-term rental such as properties for rent on Airbnb or Homeaway. That’s the beauty of investing in real estate, it’s not limited to one specific path. You can also consider getting a Real Estate Investment Trust (REIT), which is a form of passive real estate investment similar to investing in a mutual fund for stocks.
Hopefully now you realize how real estate investing can be a lucrative business over the long term, and as an entrepreneur it can help you secure generational wealth. For more info on how to get started in investing in real estate investing today, reach out to us at [email protected]