People start investing in real estate for various reasons. For instance, to collect money for their children’s college, to increase their life standards, to start a new career, to pay off a loan, to afford early retirement, and so on and so forth.Nevertheless, everyone has a common goal: to get rich. However, future real estate investors need to have the right knowledge of how to conduct real estate analysis before getting involved, investing in properties, and starting making money. In order to help you with your journey towards making money through investment properties, we present you the best ways to get rich in the sphere of real estate.
#1 The First and Main Step Towards Getting Rich
When it comes to looking for the best real estate investments, real estate investors show various viewpoints. However, no matter what type of property you are considering, you cannot just start buying investment properties without conducting prior analysis. Many inexperienced real estate investors neglect this step and only think about how fast they can get rich. The truth is that if you really want to start making money from real estate, you need to learn how to conduct a real estate market analysis first. Here you may ask: “Why is real estate market analysis important?” Well, it is considered to be one of the most essentials steps that real estate investors must take. Firstly, real estate market analysis helps to determine the estimated value of the income property that real estate investors are planning to buy, sell, or rent out. Secondly, it helps you understand the current housing market. Additionally, it helps you in learning the worth of your property through comparison with similar, recently sold ones. If you consider renting out your premises, real estate market analysis may help you to consider what rent to charge. Our advice is to charge your tenants on a monthly basis between 0.8 % and 1.1% of the property’s value. Most importantly, conducting investment property analysis will help you in choosing the optimal rental strategy for your investment.
#2 Real Estate Investment Opportunity Analysis
Once you have completed the real estate market analysis, and you have chosen your potential properties, it is the right time to proceed with real estate investment opportunity analysis. When it comes to buying investment properties, there are many decisions that a real estate investor needs to make. Conducting real estate investment opportunity analysis means that you need to complete the process of evaluating the investment by exploring its projected profit and risk. This is necessary in order to understand whether the risk of investing in a particular property is worth it.
So, how to make sure that the investment property is worth the risk? First of all, you need to explore in depth the chosen location. Location, location, location is the golden rule in real estate. The surrounding area partially determines the value of your rental property. Consequently, you need to know everything about the neighborhood in which you plan to invest your money. Don’t get scared: Mashvisor can help you in choosing the right property for you! Mashvisor’s investment property calculator presents you with insightful information. It reveals details about rental properties and their neighborhoods in no time. When completing the step of performing real estate investment opportunity analysis, you may proceed with financing the chosen property.
#3 Choosing the Right Real Estate Investment Strategy
In order to get rich, real estate investors need to come up with a suitable real estate investment strategy for their business plan. Here are two of the most widely popular and successful investment strategies:
- Real Estate Investment Strategy: Fix and Flip
This strategy is more appropriate for dynamic investors. It is for realtors who like to find a property, buy it, renovate it, and then sell it on the market. Simply put, the strategy represents buying a property at a low price and selling the fixed investment to generate income. In the ideal scenario, real estate investors need to find a property which requires cheap fixes in order to maximize its value. When you succeed in selling investment properties that went through the fix and flip cycle, the profit you earn can be for making new investments. With fix and flip, you get into a cycle of buying investment properties and selling investment properties while generating income.
- Real Estate Investment Strategy: Becoming a Landlord
One of the best real estate investments is the traditional rental properties. This is a great real estate investment strategy for real estate investors who plan to lease their properties for a long time. Moreover, with such an investment, you ensure a constant rental income. It is also possible that after some time, real estate investors sell their rental properties. The main idea behind selling investment properties is usually investing the profit in another property. This new property will potentially bring higher rental income.
Another possibility of becoming a landlord is short term rentals. Nowadays, an Airbnb rental is considered to be one of the best real estate investments. The demand for renting such properties has increased dramatically as they are more appealing to travelers. Even though short term rentals are seen as one of the easiest ways of making money, you need to take in mind the time needed for maintaining such a property as well as its corresponding costs.
#4 Getting Rid of Your Mortgage as Fast as Possible
After you have invested in your first property, you should quickly buy one more and then another. The reason behind this is being able to collect rental income from several investment properties in a short time frame. Therefore, you would be able to use the rental income to pay off the mortgage of each property easily.
It might not be obvious to many real estate investors, yet, the more rental income your investment properties you obtain, the faster you would be able to finish paying your first mortgage. Then, you would be able to start paying off your second mortgage, and then a third one, and so on. In order to get rich using this method, real estate investors should always invest in properties under their market value and that are considered to generate positive cash flow. The main advantage of paying off your mortgage early is that it allows you to take another mortgage for your next property as many banks put a limit on the number of mortgage loans real estate investors can take.