Thinking about investing your money? Building wealth? Real estate has been a popular way to invest hard-earned cash safely and reach financial goals for a long time. Of course, there are reasons why everyone (from Gen Z to Boomers) is obsessed with real estate so much. For one, its a physical thing you can actually own. Plus, it can be a steady (and guaranteed?) source of income because you can rent it out to others. History suggests (past results) that a propertys value always increases as time passes. So you can make some bags by selling them too. Today, well discuss real estate investing and the different ways to jump into it: three, specifically. Like anything else (in investment opportunities), there are several points to consider before you go deep into real estate.
Real Estate In 2024: Still a Good Choice?
Yes. Real estate has a proven record of going up in value over time. It can be a steady investment, like growing your money over time. Another plus is that real estate feels solid and reliable. You can physically own it, unlike stocks or bonds, which are just pieces of paper. Lets examine some good and not-so-good sides of real estate.
Pros of Buying Real Estate
Makes money over time: Owning property can grow your wealth as its value increases.
Steady income: Renting out a property can bring in regular monthly cash flow.
Stands against inflation: Real estate can hold its value when the cost of living goes up.
Cons of Buying Real Estate
Costs a lot upfront: Youll need a decent amount of money saved up for a down payment and closing costs.
Management time: If you rent out the property, youll be responsible for repairs and finding good tenants.
Not always easy to sell: Selling real estate can take time and effort, unlike selling stocks or bonds.
The Buy Low, Sell High Strategy
Got some capital? Get into flipping. Its where you buy an inexpensive property, fix it up where its lacking, and then sell it for a higher price to make a profit. Flipping can be lucrative. Also good if you want some short-term wins.
Lets discuss two types of flipping: house and land.
House flipping focuses on buying houses that need some work, like fixing up the kitchen or bathroom. Youll then make these improvements to make the house more appealing to buyers and try to sell it for a reasonable price.
Land flipping is a bit different. Youd buy a piece of land that might be undervalued or have some hidden potential. It may need permits or some cleanup, but once you get it ready, you can sell it for a higher price to someone who wants to build on it. You need good skills and experience for this to work effectively.
But like most things, there are good and bad sides to flipping.
Advantages of Flipping
Big profits: If you buy low and fix things up smart, then sell at the right time, you can make much money quickly.
Control over the project: You can decide what improvements to make and how much to spend.
Fast Profits: Flipping can be done quickly compared to holding onto a property for a long time.
Disadvantages of Flipping
Hidden costs: Renovations can be expensive, and unexpected problems can pop up that drain your budget.
Market risk: If the housing market takes a dip, selling your flipped property for a profit might be tricky.
Time and effort: Finding the right property, fixing it up, and selling it all requires much work. You might need to learn some handyman skills or hire a crew to help you out.
Flipping can be a good option for those who are handy and have a good eye for design. But remember, its not a guaranteed way to gain profits. And be prepared to put in the hard work.
Rent Out Your Place for Short Stays
Think of something like an Airbnb. A website where people can rent out rooms or their whole house for short trips, like vacations or weekend trips. You can have different people coming and going all the time. This can be flexible and potentially bring in more money than a traditional rental agreement. Of course, there are always two sides to the coin.
Pros of Short-Term Rentals
More money: Short-term rentals can bring in higher rent compared to long-term leases.
Flexible schedule: You get to control who stays and when. This makes it easier to plan trips or use your own place yourself.
Meet new people: You might get to meet interesting travelers from all over the world who will tell you their stories (the fun part).
Cons of Short-Term Rentals
More management: Be prepared to clean and prep the space between guests.
Wear and tear: Allowing all sorts of guests can lead to more wear and tear on your furniture and belongings.
Less predictable income: Bookings can fluctuate depending on the season or events in your area. So either you get bookings every day for some months, or you get none (possibility).
Commission Deals With Real Estate Agents
Instead of searching for properties yourself, you can shake hands with real estate agents. But whats the deal? You help them find undervalued properties. If they can sell it for a good price, you get a cut of the profita commission.
There are definitely advantages to this approach.
Pros of Joining Real Estate Agents
Easy Start: This helps you get started without any capital. Once you have saved up some commission, you can get into flipping yourself.
Big rewards: If you find a gem of a property, the commission can be a nice chunk of change.
But like most things in life, there are disadvantages to this too.
Cons of Joining Real Estate Agents
Competition: Lots of people want to partner with agents to find deals, so youll need to stand out. Answer why they should partner up with you. Prove to them that youre the right guy, almost like a job proposal.
Negotiation skills: You need to be good at bargaining to get a fair commission split. Otherwise, you might get taken advantage of.
This approach can be a good option for people with solid negotiation skills and an eye for potential in neglected properties. But be prepared to hustle.
Conclusion
Real estate investing is a thrilling way to grow your wealth. In this guide, we gave you a taste of a few different ways you can get started. From flipping properties (if you have the capital) to finding deals with agents. Plus, you can always rent out a spare room. Every approach has pros and cons, so go with what feels the best and appeals to you. With some planning and help from experts and online forums and sites, real estate can be a powerful tool to help you build generational wealth.
