Real estate investing is easier than ever to get into. If you’re looking to increase your wealth through purchasing real estate, then your odds are better than ever before.
Jumping into real estate without a plan, however, could be a recipe for disappointment and disaster. There are a lot of different approaches. If you get your real estate investing strategy squared away beforehand and use it to help plan your investments, then you’ll have a much higher chance of success.
But what is a good real estate investment strategy? Which one works the best? Do you need to incorporate more than one? Well, it depends on your personal goals and situation. Here are seven of the most useful strategies for building wealth through property investments.
1. Consider Renting
Renting can be a pain, that’s for sure. But there’s a lot of money to be made in renting homes and complexes. It is, however, important to keep track of your expenses, because they can sneak up on you (especially as a result of repair needs).
If you rent a property, you should be getting at least a 15 percent ROI in the residential space. Commercial real estate, on the other hand, typically yields higher returns. And remember that you investment is more than just your down payment. Factor in upkeep and any repairs that you need to make.
2. Corner New Markets
There’s nothing better than getting in early. The best deals are going to come from emerging markets, areas not yet cornered by other real estate investors but which have a good potential for growth.
But what constitutes an up and coming market? Well there are several things to look for. The value of a neighbourhood goes up as the average wealth of its residents improves. So ideally, you should be looking for markets that are seeing a rise in younger residents, particularly those who are stoking growing careers.
Again, being early here is key. By the time a market is known to be an emerging market, it may be too late to easily take advantage of the opportunity.
3. Visualise Your Endgame
What is your overall goal? As cheesy as it sounds, the concept of the vision board has real merit to it. It’s easier to make the right decisions if you have an idea of where you’re going.
Consider why you are investing in the first place. Your goal is to create wealth for yourself, certainly, but what are you going to do with that wealth? Do you have children you want to send to college? Are there debts you’d like to pay off for family members? Or maybe you just want to retire in style. Make sure you have a good sense of why you are investing and what your ultimate goals are.
So if you haven’t put together a plan for your journey through real estate investments, then go grab a board and get cracking.
4. Buy On The Cheap
This seems obvious, but take great care to not overpay for properties. Many people put their effort into the fixer-upper house, and this is a valid strategy. However, it is easy to lose track of the money you put into a house under these circumstances, and it can be difficult to accurately budget for expenses.
When you’re first getting started in real estate, a straight-forward house flip is a safer bet. So buy homes on the cheap and make your money from the sale.
Ideally you should be buying at 10-20 percent below market. Remember that the process for snagging properties below market value is a little different for bank-owned properties.
5. Consider Timing
This ties in with the “buying cheap” strategy. In real estate location is the most important factor, but timing is a close second. The market naturally ebbs and flows, so you’ll need to get familiar with the ups and downs of your particular market and take advantage of its dynamism. Remember: buy low, sell high.
6. Plot Out Your Growth
To reach your wealth goal, you’ll need to outline the exact steps taken to get there. Don’t just start buying properties and then selling or renting them with the assumption that eventually you’ll get to where you want to be.
Pick your goal earnings. How much money do you want to be making per month in five years? Ten years? Then do the math and figure out how much of an increase you’ll need to make each month in the meantime to gradually grow to that rate.
It is much easier to hold yourself accountable for a monthly growth of a hundred dollars or so than a sudden leap at the end of a decade.
7. Trust Your Instincts
Nothing is more detrimental than constantly second guessing yourself. If you’ve done your research and you know your strategy, then you have to make that small leap of faith and go with your gut instinct sometimes. Real estate investing is not an industry for the meek or the uncertain. Those who hesitate here are lost, so trust your intuition.