5 Real Estate Investing Strategies to Generate Wealth
There are many methods for building fortunes in the world today. One of the most accessible, even for the average person, however, is real estate investing. In fact, you will find that many rags to riches stories come from people who invested in real estate in one form or another – individuals who pursued this lucrative but, at times, risky field.
Real estate investing is a great strategy for the investor who is willing to take the time to learn about the options, risks, and potential rewards for this type of investment process. Some of the more common real estate investments are the following:
Property regularly gains value over time. It may have its peaks and valleys but, unlike many other investments that quickly lose value without warning, real estate always increases value over the long term. The problem is, however, that far too few people can actually afford to hold and maintain multiple properties over an extended and indefinite period of time while waiting for the value to rise. Many property investors manage to overcome this getting the best of both worlds — by generating cash flow by renting out the properties to tenants during the time when the property values are rising. This allows the monthly cash flow to essentially cover the mortgage payments and makes the venture a little less risky. Sure there are are risks involved when dealing with tenants (such as property damage, failure to pay the rent, and possible legal woes) but the good tenants generally outweigh the bad.
This is a highly speculative and very risky sort of real estate investing that has big booms and big busts. Many investors have discovered this reality if they happened to chose to build the property when a real estate market ‘bubble’ bursts. The risks involved in this type of investment should not cover up the fact that many millionaires have been created through pre-construction investing and many more will be created in the future. Pre-construction investing, just as its name implies is a type of investment in which investors purchase ‘options’ on the property before ground is broken. This is very popular in high demand areas that are known to experience housing shortages as prices often rise quickly and the units are often sold before they are completed and any ‘real’ money exchanges hands.
This is a type of property investment that has made leaps and bounds in the last few years thanks to the popularity of many popular home improvement and house flipping shows over the last few years. More and more people have decided to pursue this sort of investment in hopes of creating big profits in a short period of time and with minimal investment. The problem, of course, is that it always looks much easier on television than it is in person. Couple this with the fact that many people have unrealistic expectations when it comes to projecting costs and “after repair value.” Flippers generally get better over time as they learn from previous mistakes. For those who are successful, however, there is the potential for great profit in a relatively short amount of time.
Buy and Hold
As mentioned above, real estate tends to gain value over time. Even if the buildings are in desperate need of TLC and repair. The very land they are standing on is, more often than not, gaining value as the years pass. Purchasing vacant land or even several houses and holding on to them for a period of time, can often fund college educations for children, pay for weddings, or greatly supplement retirement funds. The longer these properties are held, the better, in most cases, as this provides the greatest opportunity for the value of the property to increase.
There are few people in this world who have never experienced rough spots financially. Many of these people are denied traditional home loans because of their inability to cover debts properly in the past. For this reason, they are often willing to pay for the privilege of rebuilding their credit while working towards a path of home ownership. For these people, a lease option presents a workable and often valued solution. Those investors willing to provide lease option properties to higher risk buyers may take the risks but also will find the rewards are well worth the effort.
These are only some of the investment opportunities that exist for those who are interested in real estate investing. There are commercial real estate endeavors that have the potential to bring in huge profits as well, such as office buildings, apartment communities and the development and planning of housing communities. Needless to say, real estate investing offers many opportunities to the savvy investor willing to put in the time and effort.