Real estate investing can make you rich! Of course, this phrase may sound like a promise of a salesperson on a late-night television show. However, in real life, real estate is a powerful wealth building tool that has made thousands, even millions of real estate investors fall into the category of “rich real estate investors.” So, could you be the next real estate investor that makes a fortune with real estate investing?
The answer is YES! Yet, not every real estate investor who has purchased a real estate investment becomes rich. Moreover, many real estate investors experience difficulties in locating the best real estate investments. Instead, they find only stress and a minus in their bank account. Such beginner real estate investors may struggle for years. The reason? Lack of preparation and/or a wrongly chosen optimal rental strategy. Consequently, they could not build the wealth they have dreamed about. The question, therefore, is: “How does someone get rich with real estate investing?” Curious to find out how to become the most successful real estate investor? Keep on reading!
#1 Can Real Estate Make You Rich: Choosing the Real Estate Career
When you are new to real estate investing, yet, you are thinking about a real estate career, you should know that there are several real estate career options for you to choose from. Additionally, note that the choice of your real estate career highly depends on the type of person you are as well as on the level of experience and education you have in the real estate investing business. So, what options do you have?
Curious to learn more about careers in real estate investing? Make sure to read “Is Real Estate Investing the Right Career for You?”
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Real Estate Agent
A real estate agent is seen as the middleman of any transaction in the real estate investing business. When considering becoming a real estate agent, you should be prepared that your job will mainly consist of supporting real estate investors as well as developers with their businesses.
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Real Estate Developer
Curious to know if the real estate market will grow? Well, that highly depends on the real estate developers. They are seen as the engine of the real estate industry as they are the ones who develop new real estate projects. A career as a real estate developer has many things in common with entrepreneurs because a developer is the one who initiates a project, finds the land, manages the finance and construction processes and in the end finds investors to sell the project to.
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Real Estate Investor
Becoming a real estate investor is seen as the most accessible real estate career choice. Nonetheless, how is becoming a real estate investor different from other career choices? Well, becoming a real estate investor is not exactly a career choice, even though it may become one. A real estate investor can have another full-time job apart from making money in real estate. In order to become an investor, all you have to do is to start investing in various properties for either selling the investment or renting it out. That is a great way of getting rich. Sure enough, you need to find the best investment properties first.
#2 Can Real Estate Make You Rich: Finding Out How to Invest in Real Estate
So, how to invest in real estate? You should be prepared as you may get into financial trouble if you do not analyze all the possibilities. In real estate investing, there are several investment strategies that are mainly used by the most successful real estate investors. Additionally, you should choose a strategy depending on your personality. You should do what you like; this is the secret of how to get rich in real estate. Below, we will mention two of the most popular investment strategies.
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How to Invest in Real Estate: Fix-and-Flip
The fix-and-flip strategy is one of the fastest ways of making money in real estate. The idea behind this strategy is that you find properties that are in bad shape and that are for sale at a drastic discount compared to the average market prices. After you find where to invest in real estate and buy a property, you renovate it to increase its value and sell it for a higher price. Therefore, that is one of the possible ways how to get rich in real estate. Interested to learn more about fix-and-flip? Make sure to read “Real Estate Investment Strategies Guide: Fix and Flip.”
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How to Invest in Real Estate: Rental Properties
Investing in rental properties is one of the best answers to the question: “How to make money in real estate?” Buying a property with the idea to rent it out to potential tenants in order to generate rental income is one of the best real estate investments that many investors make. However, it is not as easy as it sounds. There are many factors that have an influence on the profitability of your rental property. For example, the location, the features of the property itself and the strategy you choose will have a major impact on your success. Interested to learn more about real estate investing? Make sure to read “Real Estate Investing: Traditional vs. Airbnb Investments.”
#3 Can Real Estate Make You Rich: Thinking about the Location or Where to Invest in Real Estate?
Knowing where to invest in real estate is crucial if you plan on becoming one of the most successful real estate investors. So, what questions should you ask yourself to be one of the rich real estate investors? First of all, ask yourself: “Where to invest in real estate?” Location is crucial to the success of your business. For example, you do not want to end up having a property in a neighborhood with a high crime rate.
Second of all, select the best real estate investments. Do not forget to calculate the return on investment to make sure that the chosen property will be a profitable one. However, how can you make sure that the seller of the property does not ask too much? Well, perform real estate market analysis to understand the current situation of the real estate market. After conducting the real estate market analysis, you will know if the seller is asking too much for his/her property or not. This way you will be able to negotiate and possibly lower the property price.
#4 An Example of How to Make Money with Rental Properties
Imagine that Bob wants to get rich and build wealth through real estate investing in rental properties. So, he finds a property for $250,000 in his area. After conducting the real estate market analysis and investment property analysis, Bob is convinced that this is a great real estate deal. He invests $50,000 for a down payment and gets a mortgage loan of $200,000 from a bank for the period of 30 years.
Bob receives a rental income of $3,000 monthly. However, his expenses are reaching $2,500 leaving him with $500 of positive cash flow, which increases every year as rent rates tend to increase yearly. Over the next 30 years, the value of Bob’s investment goes up reaching $600,000 (do not forget about a 3% per year increase due to appreciation). Consequently, after 30 years the mortgage loan is paid and Bob now has an asset worth $600,000. In reality, the property paid for itself. Moreover, Bob constantly makes money from renting his property.
Of course, no one wants to wait 30 years to become rich, so how could Bob speed up the process of getting rich through real estate investing? Well, there are a few options.
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Get a Better Deal
There is always space for negotiating. Many real estate investors are afraid to ask for a lower price and most of the time accept the one the seller sets. Imagine, if Bob could negotiate better and get the same property for less, let’s say, $200,000? This would make his growth faster.
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Purchase More Properties
Bob could purchase more properties, for instance, every year. That way, he would be able to generate greater rental income as well as benefit from the total asset’s value which would be way higher than having only one property.
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Choosing Appreciating Neighborhoods
If you spend more time on research you may find out which neighborhoods have job growth or other growth indicators. For example, appreciation in such areas might be higher, perhaps, 5-8% instead of 3%. Do not forget that improvements on the property can also cause its market value to increase.
So, is real estate a good investment? The answer is yes. However, if you do not try real estate investing for yourself, you would not be able to find it out for yourself. Make sure you are not stuck in the “education mode”, find a niche for yourself and start with investing as it is the only way of truly learning how to get rich in real estate.
Encountering any troubles with real estate investing? To learn more about all aspects of real estate investing, continue reading our blog.
