Achieving financial independence is the goal of every ambitious and business-driven person. The prospect of generating multiple streams of income while not being constrained by a work schedule is a lifestyle that many aspire to lead. But how exactly can you achieve this? And what type of investment makes quitting your job a viable possibility? The answer is quite simple: Real estate investing. In this article, we’ll explain how building wealth with real estate can transform your life and we’ll share a few tips on how to be your own boss.
How Investing in Real Estate Can Help You Make Money
Making enough money to quit your day job is not only realistic with real estate, but it’s also quite simple to achieve once you have understood all the moving parts of the business. Becoming a real estate investor offers you a multitude of highly profitable investment strategies to choose from. Moreover, the learning curve of real estate is not as steep as other sectors. Even investors with minimal prerequisites can strive to generate a decent return on their first investment.
Here’s a brief overview of what starting a real estate business can offer to investors.
1- Leverage can boost your profits
One of the best things about real estate is the fact that you can use leverage to buy investment properties. As a matter of fact, you can use as little as 10% of your money while borrowing the rest from mortgage lenders. This will allow you to take on large real estate investments and generate an income that you wouldn’t otherwise be able to generate with other types of investments.
2- Appreciation is an effective way to build wealth
Capitalizing on property appreciation rates has long been one of the go-to strategies for real estate investors. An investment property will naturally increase in value each year, more often at a rate higher than 5%. Over time, your portfolio will be worth substantially more than what you started with, and more importantly, without requiring any extra investment.
3- Rental properties can generate passive income
When it comes to generating consistent passive income, few investments can match rental properties. A single condo in a major real estate market can generate rental income that is higher than the average US household income. Needless to say, buying multiple rental properties is a strategy that is guaranteed to produce tremendous cash flow.
4- The tax benefits of real estate investing are incomparable
The tax advantages that come with real estate investments are numerous. In fact, the tax deductions on an investment property cover a wide array of expenses. Some examples of these are interest on the mortgage, maintenance costs, and legal fees. Furthermore, the investor is allowed some latitude when it comes to depreciating the initial price of the investment property.
Related: The Tax Benefits of Real Estate Investments
Now that you’re familiar with the benefits of investing in real estate, let’s explore a few steps that will enable you to become your own boss.
How to Be Your Own Boss in Real Estate in 5 Steps
Achieving the financial freedom that you dream of can only be achieved through a meticulous and well thought out plan. Let’s go through a few steps and tips that will show you how to be your own boss.
1- Set specific objectives
A common real estate investing mistake that novice investors make is neglecting to set objectives before embarking on a business venture. The importance of fixed goals cannot be understated. In fact, having a clear idea of what you want to achieve is one of the main hallmarks of a coherent plan. Here are some of the variables that you need to address in this step:
- Set a maximum budget cap for the investment
- Identify the baseline income that you need to generate in order to quit your job
- Determine your level of risk tolerance
- Specify a time horizon for your investment
Getting everything right at the very beginning will allow you to build a solid foundation on which your venture can flourish.
2- Pick a real estate investment strategy
The next step is to pick the strategy that suits your needs. Like we mentioned above, real estate offers a plethora of strategies that vary in terms of their level of risks, time horizon, and complexity. Let’s take a look at some of the strategies that can easily be implemented by beginners in real estate.
- Passive strategies: Although less profitable than other approaches, passive strategies are without a doubt the easiest to implement. A completely passive approach can be a perfect way to dip your toes in the real estate market. Such strategies include investing in a Real Estate Investment Trust (REIT) and buying properties via crowdfunding.
- Investing in rental properties: This is probably the most common real estate investment strategy. The idea is straightforward; you buy multiple properties, you put them up for rent, and then you collect rental payments each month. If you get your investment property analysis right, your investment will start generating positive cash flow in just a few months.
- Fix and flip: This strategy revolves around fixing distressed properties and selling them for a profit. However, fix and flip requires quite a bit of experience in real estate. There are several factors that come into play and costs can quickly skyrocket if you’re not careful enough.
The key to succeeding with these strategies lies in the ability to find the best rental properties to invest in. Using real estate data and metrics is one of the most effective ways to go about this. Fortunately, you can access such data right here on Mashvisor. Tools such as the investment property calculator can be a great asset to your investing efforts. Click here to learn more about this product.
Related: The Best Rental Real Estate Strategies for Beginners
3- Take time to master your strategy
After you pick an investment strategy, it’s important that you dedicate time to learn everything about it. With the resources that are available to real estate investors these days, acquiring vast knowledge about the market has become a simple process. In addition to this, consider taking a course that goes over the legal and tax aspects of real estate.
4- Use leverage
Using leverage allows you to pay a fraction of the total cost of the investment property. This effectively lowers the barrier to entry for investors with small budgets and enables them to maximize available capital. More importantly, leverage is the most effective way to grow your investment portfolio and increase your net worth over time.
Related: Avoid These 4 Mistakes When Leveraging Real Estate Investments
5- Scale your investment
Once you have found a working blueprint, the next logical step is to repeat the process on a wider scale. As your income grows, continue adding different types of investment properties to your portfolio to ensure steady and incremental growth.
The Bottom Line
All things considered, investing in real estate stands out as the most straightforward and effective way to achieve financial independence. Take action right now and embark on the journey to becoming your own boss!
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