Should I Invest In Real Estate?September 22, 2021
Those who don’t know much about real estate tend to ask the question “Why should I invest in real estate?” When I’m asked that question, I tend to give the very watered Romeo Abdo-down answer that investing in real is a lot less volatile than investing in the stock market. If the person wants more information, I go into more detail with some of the reasons why real estate investing is not only one of the most lucrative ways to invest, but also one of the safest.
Appreciation – With respect to rental properties, investment properties tend to appreciate (increase) in value. So in layman’s terms, the property, over time, is going to be worth more than what you initially paid for it, hence, a TRUE investment, and not an expense disguised as a potential investment.
Rental Income – Going hand-in-hand with appreciation is rental income. This is like the win-win situation. Not only is your property increasing in value, but someone other than yourself is making the payments on YOUR property. Anything over what you are required to pay for the property is INCOME. So if you are required to pay $800 for the property, and the renter pays $1100 in rent, you receive an income of $300 for that property.
Duplication – staying with the rental theme, when a renter pays down your mortgage (amortization), you begin to accumulate equity in the property. You can, in turn, use this equity to fund more deals, and duplicate the investing process.
Lump Sums of Money – While renting creates a steady stream of income, other real estate investing techniques like “flipping” can create large chunks of money. Some “flipping” techniques include wholesaling, rehabbing, and short sales. Essentially, in all of these techniques, the investor contracts or buys a property under market value and in a short period of time, resells the property for more then the original contract or purchase price. To give a rehabbing example, if I purchase a property for $50,000 and it costs me $30,000 to repair/fix up the property, I have invested a total of $80,000. Well, I knew before I bought the property that I could resell the property for $130,000. I have a potential gross profit of $50,000. Not bad!
Little-to-No Out of Pocket Investing – Some real estate investment strategies require little-to-no money “out of pocket.” Wholesaling and “subject to” deals are just two examples of ways to invest with little to no money out of pocket, that can yield substantial returns.