Why real estate? Isn’t all the money in the stock market? Isn’t it a big pain being someone's landlord? Maybe. But what if we go through 2008 all over again? Could happen.
Top 4 reasons to invest in real estate:
- Cash flow- This is the money you get after you pay the mortgage and take care of your other monetary obligations for the property. You get this money every month for as long as you have the property.
- Loan paydown- Someone else is paying the loan for you. You basically have the house for free as long as you have a tenant. If you have it long enough and/or use some of your cashflow to make extra payments, you’ll pay your loan off even faster.
- Tax benefits- You can use losses and improvements to bring down your tax bill. Keeping detailed accounting books on each property come in handy when its time to talk to the tax man.
- Appreciation- over the long run, your property will increase in value. The longer you keep it, the more valuable it will become. You can then use this equity for lots of different things...like buying more property.
These are the 4 holy commandments of investing in real estate. And these are the reasons to invest in real estate. If that isn’t enough to get you interested, you really don’t want to make money.
Lots of people say the reason they don’t want to invest in real estate is that they don’t want to unclog toilets for other people in the middle of the night. What this really means is that they don’t want to be inconvenienced to make money. I don’t know about you but, getting up in the morning to drive to work is a big inconvenience to make money. Making money is an inconvenience. Having money isn’t.
How can you invest in real estate?:
- Single family homes- multiple homes over time add up to a big portfolio.
- Multi-family homes- Having more doors in a smaller area makes it easier to collect rent and make repairs.
- Turnkey properties- If you don’t want to look for or fix up properties, there are companies that will do that for you. All you have to do is supply the money and they’ll give you an occupied rental property.
- House hacking- Find a beat up house and move in. Fix it up over time and then move you and find the next one. Do this a few times and you’ll build a small empire.
- Rent out Airbnb- Buy a house with a lot of rooms in popular areas and rent it out like a hostel. Renting single rooms might be more successful than renting the whole house depending on where it is.
- Invests in real estate investment trusts- If you want nothing to do with any of these suggestions, invest in a trust that holds real estate. It works like a market fund. Someone else manages everything.
- Hard money lending- if you want to be more incharge of your money than in the suggestion above, you can lend out money to other real estate investors at a premium. Short term loans allow others to lock down properties and you can make money in a shorter period of time.
