Have you ever wondered how to become a billionaire? One of the easiest and fastest ways of growing wealth is by becoming a real estate mogul. Many people all over the world are buying multiple properties and getting rich with real estate. Here are some of the reasons why you should consider investing in real estate to make money:
- Cash flow – Investors that own residential real estate properties enjoy positive cash flow from rental income. However, this varies depending on monthly costs such as capital expenditures, repairs, vacancy, and other regular expenses.
- Real estate appreciation – Historically, the value of real estate has always appreciated over time. This means that you can sell an investment property at a much higher price after several years and build wealth with real estate. Besides natural appreciation, you can create ‘forced appreciation’ by physically renovating the property.
- Easier to pay off a loan – Owning a rental property means that your tenant is actually paying part of the loan for you. This reduces the burden of loan repayment for an investment property.
- Tax benefits – To encourage leasing and purchasing of property, the government offers real estate investors tax write-offs. The money saved can then be used for buying and owning multiple rental properties.
- No need for credit – Even if you have a poor credit score, there are ways of finding financing for real estate if you look hard enough.
- Low capital requirement – You don’t need thousands of dollars to start building a real estate empire. There are numerous distressed properties and lower-priced homes out there that the average American can afford.
7 Real Estate Investment Strategies for Building Wealth
For anyone thinking of how to become a billionaire, here are some strategies to consider:
1. House Renovation Flips
Thanks to the popularity of shows such as ‘Extreme House Makeover’, home renovation has experienced a massive boost in real estate. Successful real estate investors are now buying distressed buildings, improving them, and then selling them off at a much higher price. However, while fixing and flipping houses can be a very profitable strategy, it should be approached with caution. If you don’t have the experience or knowledge, you could find yourself counting losses.
What will be the value of the investment property once all the repairs and renovations are done? This is a question that every real estate investor needs to ask before making a commitment. To determine that, you will need to carry out an onsite tour with an experienced contractor or real estate agent.
2. Long-Term Residential Rentals
It is a fact that people will always need a place to reside. As a result, the demand for rental properties is on the rise. One of the best ways of growing your net worth through real estate is by investing in long-term buy and hold residential rentals.
Location is one of the most important factors to consider before investing in rentals. Make sure the investment property is located within close proximity to amenities such as bus stations, schools, malls, hospitals, and railway stations. In addition, you need to check real estate analytics for metrics such as cash on cash return, net operating income, cap rate, and gross rent multiplier. Tools such as Mashvisor have made it easy for investors to locate the best investment properties in the right locations. Don’t forget to conduct a thorough inspection to ascertain the current condition of the property.
3. Short Sales
Short sales happen when a homeowner has defaulted on paying their home loan, but the property has not been foreclosed. Since the property is being sold for a price lower than the market value, it can be a great investment opportunity to make a good profit without having to carry out extensive renovations. However, investing in short sales can be tricky since you might be required to pay in cash, sometimes even before seeing the property. In addition, the process of a short sale could take much longer compared to other investment property options.
4. Vacation Rentals
Short-term rentals can be a very lucrative source of passive income for anyone that is thinking of how to become a billionaire. You could especially make a lot of money in locations close to amenities such as beaches, historical sites, restaurants, and theme parks. Besides Airbnb, you can list your vacation rental on sites such as ClickStay, TripAdvisor, Booking.com, Perfect Places, and HomeAway. However, owning a vacation rental will mean hiring professional property management services to manage the day to day running of the real estate investment.
5. Commercial Real Estate
People will always need space to run their businesses and store their goods. This could be anything from offices and shopping malls, to warehouses and factories. By purchasing a commercial property and adding value to it, you can make a lot of money by either flipping it or renting it out. With a single transaction, you could make hundreds of thousands of dollars. However, investing in commercial income property can be a very risky affair, especially for beginners in real estate. It would, therefore, be advisable for newbies to begin by investing in residential real estate and learning the ropes before venturing into commercial investments.
6. Lease Options
Leasing with an option to buy can be a great way of building a real estate investment portfolio without having to spend a lot of money at the outset. This can be a great strategy for a real estate market that is increasing in value since you are creating a pre-set price in case you decide to purchase the property later. You could also choose to sell your rights for buying that property to someone else for a profit.
7. Investing in Land
Though usually overlooked, investing in land is another great source of income. When amenities such as roads, railways, residential properties, and commercial properties develop in the surrounding areas, your land will automatically appreciate in value. You can then sell it for a profit or build rental properties on it. Alternatively, you could choose to invest in mineral-rich or agricultural land.