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How to invest in real estate to build long-term wealth

Investing in real estate takes time, patience, and most importantly, cash.You probably shouldn’t invest in real estate until you have an emergency fund, no debt, and are saving automatically in a retirement account.If you have enough cash to buy a multi unit property, living in one unit and renting out the others can be a great way to start generating passive income.If you don’t have cash to buy a property, try investing in a real estate investment trust (REIT). You’ll get exposure to the real estate market and get paid in the form of dividends.Real estate can be a very lucrative investment, but it requires a huge time commitment, patience, and most importantly, cash. While there are options for novice investors to get into real estate, the big returns are found in the big investments — for example, buying and managing a multi-unit building or fixing up a single-family home and selling it for a profit.Here are a few ways to get into real estate investing:

How to invest in real estate to make money

1. First, get your finances in order

Before getting in to any type of real estate investment, get the rest of your financial house in order establish an emergency fund, pay off consumer debt, and automata your retirement savings.Real estate is a particularly expensive investment, so you need to have cash on hand for a down payment (or to buy the property outright) and a reserve to dip into if and when something needs fixing, which should be entirely separate from your everyday emergency fund.

2. Try investing in an REIT

If you want to wade into real estate, investing in a real estate investment trust (REIT) will provide exposure to the market without the time and cost commitment of buying your own property.Equity REITs, the most common type of REIT, allow investors to pool their money to fund the purchase, development, and management of real estate properties. An REIT focuses on a specific type of real estate, such as apartment complexes, hospitals, hotels, or malls. Ninety percent of annual earnings usually in the form of rental income are returned to the investors as dividends.If you’re willing to part ways with your money for the potential to earn greater returns, consider investing in the private real estate market through an online broker. They helps you invest in real estate projects without having to actually manage them. Investors can choose a portfolio to invest in based on their goals either supplemental income, balanced investing, or long-term growth and earn dividends quarterly.

3. Get to know the local housing market

If you do plan on buying your own investment property, start by getting to know the local market or better yet, stay in your own neighborhood.Talk to real estate agents and locals; find out who lives in the area, who is moving to the area, and why; and analyze price history. In short: Do your research.

4. Build a local team

Successful real estate investing is as much about what you know as who you know, said Boston-based realtor and real estate investor Dana Bull. Build a team of real estate agents, contractors, attorneys, and accountants who can all help your business run smoothly.

5. Keep it simple

A simple strategy can go a long way in real estate investing. If your goal is to generate passive income, don’t be fooled into believing you need to go big to make it happen.The game of rental properties is eventually getting it free and clear of debt, so that you have a very low-risk, high-income investment that allows you to go to Ecuador and do whatever else you’re going to do with your life leave your job or have a little independence to do other things.

6. Buy a single-family home and rent it out

Buying a single-family home and renting it out will only generate income if overhead costs are low. If your tenant’s rental payment doesn’t cover the mortgage, insurance, taxes, and maintenance, you’re effectively losing money. Ideally, your monthly mortgage payment will be relatively fixed, while rent prices rise, increasing the amount of money you pocket over time.You can even shop for rental properties online through a site. which allows sellers of vacant homes primed for renters to list their properties, facilitates the buying process, and assigns a property manager to the new buyer. 

7. Try ‘house-hacking’

Some people got started in real estate investing through a strategy called “house-hacking.”For instance you can buy a four-unit building with a mortgage, and lived in one unit himself and rented out the other three. This cut down his own living expenses and generated enough income to cover his mortgage payment, taxes, and insurance every month. Put any leftover money into savings, which is used to take care of inevitable maintenance costs and roll into next investment.

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