5 Simple Steps To Start Building Wealth In Real Estate
| 4 minutes read
Over the years buying property has been one of the best assets people and millennials consider. Especially during the pandemic, the way the price of properties went down; currently, people are encashing the opportunity because the cost of properties won’t skyrocket immediately, but it is a good bet for investors and property holders for the long period.
Now homeowners are trying to figure out how to navigate the “new normal” of a post-pandemic real estate reality. If you’re among that group, either buying or selling, here are a few crucial steps on how you can dominate the modern real estate market?
Most people think real estate is a market where you can print money, but this is not true. This article will discuss a few simple steps to start building wealth in real estate.
1. Assess Your Finances
The first and most important rule of real estate isn’t a location. It’s understanding and understanding of your financial limitations. It’s a rule always there, and it was before pandemic and post-pandemic. If you have minimal funds, it’s risky to buy properties via loan if you have a poor grasp of your finances. Facilities like down payment and EMI could hurt your financial situation and put you into trouble. You may find that you can’t pay your mortgage consistently in the long term.
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2. Long-term Residential Rentals
One of the easiest and most common methods for making money in real estate is to leverage long-term buy-and-hold residential rentals. People need a home to live in where they create memories; this means people will involve with rental properties.
You need to do the proper amount of due diligence to source your property by keeping three principles in your mind: location, location, location. Before finalizing the house, every buyer considers the place; each area has a different price. You might have noticed that the costs of the assets increase after specific years. It also means you can increase the rent over time; all you need is to have tenants for the long term.
When you’re considering long-term residential rentals, look for a great location. That’s more important than the current state of the property itself. Run-down homes in significant areas are among the best investments you can make.
We also recommend reading the real estate startups article we covered previously.
3. Time the Market
Eventually, you will have succeeded in building wealth with real estate. The time will come when you can begin to reduce financing to cut your costs. Despite the commonly held belief to the contrary, real estate values do go down sometimes. In 2006 and early 2007, nobody would have guessed that the importance of properties would soon crash by 30 to 50% leaving many property owners underwater.
Nobody except professional real estate investors with a life-long timeline, that is. Being prepared to jump in and buy distressed properties during a downturn is a wise long-term strategy. It can mean the difference over one’s career between a comfortable income and a windfall. Building wealth with real estate takes time, but the opportunity and the investment tools are at your fingertips.
4. Residential Lease Options
Lease options can be a great way to get involved in real estate without putting up a significant amount of capital or even having excellent credit at the outset. This tends to work well when the real estate market is going up because you’re creating a pre-set price at which you can later purchase the property.
If, for instance, the property market climbs substantially, you can buy that property at a discount. You could also potentially turn around and sell your rights for that purchase to someone else. The clear bet here is on the bull market in real estate. As long as this is an option you can exercise and not something set in stone that says you have to purchase at the end of the lease regardless, you could very well turn a profit.
5. Perfect Your Bid
If you’re a buyer trying to win a home, there’s a good chance that you’ll end up in a bidding war. The bidding frenzy reached its height during the early days of the pandemic. However, Redfin reported that the percentage of offers that faced bidding wars was down to 59% by August 2021.
In other words, there’s still a very high chance that you’re going to find yourself competing with others to win a bidding war. However, there are several ways that you can optimize a real estate bid beforehand, including:
- If possible, but with proof, making a cash offer will speed up the homebuying process and reduce the closing costs.
- Offering a larger down payment if a complete cash offer isn’t an option.
- Following your financial limitations and resisting the temptation to make poor decisions dictated by emotions.
Is Real Estate The Best Way To Build Wealth?
While making money in real estate, you can minimize the risks and get a high return on your investment real estate, but it comes with proper understanding and experience. For example, you may buy fixer-uppers, repair them, and rent them out. Or you might be buying existing rental properties with tenants, knowing you can improve the cash flow by getting rid of non-paying tenants and adding amenities that allow you to increase rental rates.
Real estate is one of the best investments available to make ample money, assuming you buy properties that have good fundamentals in their favor. Moreover, it is one of the few businesses where banks are almost eager to loan you money, whereas banks reject roughly half of all business loans. As a result, real estate almost always appreciates at a rate higher than inflation. Property appreciation rates have averaged 3 to 5 percent annually for the past thirty years.
So overall, we can say real estate is one of the best ways to make money, but by understanding a few things (mentioned above), you can minimize the risk, book your profit, and make money.