Real estate is and has always been a very popular investment vehicle. A lot of millionaires globally have made their wealth by investing in property. Of course, you can’t get rich overnight by investing in real estate. It takes time and of course, a lot of patience. However, if you are thinking of investing, real estate is something that you should seriously consider adding to your portfolio.
So, why should you invest in real estate? What are the different ways of investing? As a real estate investing mentor, here is my take on investing in real estate in the US.real estate investing mentorreal estate investing mentor
Why should you invest in real estate?
If you ask experts, almost all of them would advise you to invest in real estate. But why? Because it yields high returns. However, as a property investment mentor, I would say that identifying good properties is crucial for real estate investing. When done right, real estate investing can give you high returns at minimum risk. Bad properties can actually eat away your investment.
Having said that, here are some advantages of investing in real estate.
It diversifies your portfolio
First, real estate usually does not have any correlation with other paper-based assets such as debt or equity. In contrast, it has a negative correlation with assets such as gold or stocks. This means that investing in real estate helps you diversify your assets. Other asset classes typically do not affect growth in real estate. Although prices may fluctuate over time, history is proof that real estate appreciates over the years.
You can use it as a hedge against inflation
By investing in property, you not only benefit from appreciation but you can also earn through rental income. There is no other investment that can effectively beat inflation as consistently as real estate. If you invest in the right properties, your returns could easily outsmart inflation.
It generates cash flow
With the right real estate investment plan, you can easily generate cash flow. Cash flow is the income you earn after deducting mortgage payments and operating expenses. By paying off your mortgage and controlling operating expenses, you can strengthen your cash flow over time.
You benefit from appreciation
A common benefit that mentors and real estate investment training courses will tell you is that property value appreciates with time. Between February 2021 and February 2022, home prices in the US increased by 20%. Besides appreciation, homeowners can also profit from rental income and other property-dependent business activities. Real estate prices have always increased with time. By investing in good properties, you can earn a tidy profit when you make a sale. Rents also increase with time, which means that you can also benefit from increased cash flow.
It creates wealth
Once you have paid off your mortgage, your property becomes an asset- a part of your net worth. By building equity, you create the leverage to buy more properties. More property means more cash flow and wealth.
What are some of the best ways of investing in real estate?
Investing in real estate can be lucrative as it can help you create an additional source of income. If you look at real estate investment training programs or online real estate investment courses, you will realize that there are several ways to invest in real estate.
Best ways to invest in real estate
Real estate investment trusts allow you to invest in real estate without having to buy property. REITs usually pay high dividends, which is what makes them a great investment option. If you are not looking for a regular income, you can easily reinvest those dividends and grow your investment even more. However, the type of REIT you purchase could determine the amount of risk you are taking on. Some REITs aren’t publicly traded, while others can be traded on an exchange like stocks. Non-traded REITs may be hard to value and even more difficult to sell. If you are a new investor, I would recommend sticking to publicly traded REITs.
Rental properties generate rental income which is an excellent way for investors to grow their portfolios. You should look for properties that offer positive cash flow. That way you can use the cash flow from one property to buy other properties, and enhance your portfolio.
Here I would like you to consider another strategy and that is house hacking. So, you invest in a prime property and then rent out a portion of it while remaining in the other portion. For instance, if you buy a three-bedroom house, you could consider renting out two bedrooms while living in one. It is a great strategy, especially for young homebuyers. They can buy a piece of prime property that is closer to their school or workplace, which they otherwise would not have been able to afford.
Flipping properties is another profitable way of investing in property. You buy an underpriced home, renovate it, and then sell it for a profit. House flipping is a lot riskier than it sounds. You need to have a very accurate estimate of how much the repairs and renovation are going to cost. This may not be the right strategy for a beginner. However, if you must invest in flipping properties, I suggest you seek the help of a real estate coach or enroll in a real estate investing mentor program. You may have the necessary capital to invest. However, you can only make it a profitable venture if you are good at estimating costs and managing the project.
What are the challenges in real estate investing?
Real estate investing can be quite profitable, but there are drawbacks as well.
- Investing in real estate is time-consuming. From finding the right property to property appreciation, everything takes time. If you want to get rich quickly, this may not be the right option for you.
- The income from real estate could vary from time to time. There may be periods when appreciation or an increase in rental income is not much.
- You will incur maintenance costs. Buying a property is not enough, you also have to maintain it. Sometimes the associated repair costs could significantly deplete your cash reserves.
- If you are investing in property for rental income, rent controls imposed by the Govt. could hamper your ability to raise the rent. You may not be able to profit as much as you had expected.
- The transaction costs of buying and selling property can be quite steep.
- Liquidity is an issue with real estate. You may need cash urgently but selling off a property takes time, to ensure that you get a profitable deal.
Investing in real estate can be a very profitable deal. However, you need to have a good understanding of what you are investing in. Real estate mentoring in USA could be very beneficial in making the right moves while investing in property.