If you study wealthy people in the world, the vast majority of them owe a large percentage of their wealth to real estate. They either used real estate to become wealthy in the first place, or they leveraged it to exponentially increase the wealth they earned in another pursuit. Thankfully, real estate is accessible to anyone. It’s up to you to take advantage of it.
Different Ways to Win With Real Estate Investing
If you want to know how to build wealth, spend some time examining how wealthy people have achieved their success. And whether it’s the 19th, 20th, or 21st century, real estate always seems to be at the crux of the matter.
As former U.S. president Franklin D. Roosevelt once said, “Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth.”
And then there was billionaire industrialist Andrew Carnegie who was once quoted as saying, “Ninety per cent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”
One of the most interesting aspects of real estate is the diversity of opportunities available. Here are a few of the most common ways people win with real estate:
- Rental Properties
Warren Buffet, who has made most of his wealth from stock market investing, lauds rental real estate as one of the fastest and best ways to build wealth in today’s world.
“If I had a way of buying a couple of hundred thousand single-family homes and had a way of managing them,I would load up on them. It’s a very attractive asset class,” Buffett once explained.
Rental properties offer a number of distinct benefits, including monthly cash flow in the form of rental payments, tax deductions, and the appreciation of the property itself over time.
If you’re going to go the route of investing in rental properties, it’s wise to hire a property manager to oversee your properties and make things as hands-off as possible. The type of property manager you hire will depend on the property. If it’s a luxury property, for example, you’ll want a luxury property management company. And if it’s a vacation property, you’ll want a company that specializes in short-term vacation rentals.
- House Flipping
Not looking to buy and hold real estate? While it carries more upfront risk, you can enjoy the possibility of faster (and higher) returns by flipping houses. Despite how easy HGTV makes it look, this investment strategy does require a lot of work and effort. However, it can definitely be worth it.
The objective of house flipping is to buy a house at a below-market price, fix it up, and sell it for a much higher price. So you might buy a property for $150,000 and put $50,000 of work into it knowing that you can sell it for $250,000 once it’s all said and done. That leaves you with a $50,000 profit.
- Raw Land Investments
While it might not be as attractive as owning a rental property or flipping a house, raw land investments are among the most lucrative long-term investments. As the old land saying goes, “They aren’t making any more of it!”
In addition to holding raw land for the purposes of appreciation, you may be able to harvest the land for timber, lease it out to farmers, or build a residence on the property and lease it out.
- Hard Money Lending
Not interested in actually owning real estate, but still want to participate in the upside? If you have cash on hand, you could act as a hard money lender for real estate investors in your network. This is a good way to make eight to 12 per cent on money that would otherwise be sitting in a bank account making almost nothing.
Adding it All Up
There are no shortcuts to building wealth. But if you’re looking for methods that are faster and more predictable, look no further than real estate. Whether it’s buying and holding rental properties, flipping houses, investing in raw land, lending money to other investors, or putting cash into REITs, the opportunities are virtually endless. What will your strategy look like?