If you want to achieve financial freedom, investing in real estate might be the key. The truth is, it’s not an overnight get-rich-quick plan. However, you can build wealth from the passive income and tax benefits investing in real estate can bring. If you are a beginner, you will need to learn as much as you can about the types of investments and strategies to make an informed plan. You will need to know about property management, taxes, and financing.
You don’t need to spend a lot of money on expensive training courses to learn how to invest in real estate. There are many excellent books and resources that can teach you everything you need to know. Another important thing to research is what renters are looking for, so your investment will be sure to turn a profit.
What Does Financial Freedom Look Like To You?
Financial freedom can look different for one person than another. Do you want to earn enough money to pay down debt and save more for your retirement? Perhaps you want to retire early and travel the world. You might even pursue your dreams of becoming a millionaire. If you play your cards right, all of these goals are possible with real estate investing.
Set Clear Goals
Once you have decided what financial freedom looks like to you, then you can start to set goals to get you there. Create a timeline of where you want to be financially in 5, 10, and 20 years. Some real estate investors connect each investment property to a specific life goal. If you set a goal to pay for your child’s college tuition or retire early, you will need to determine how many properties you will need to achieve your goal.
Create A Plan And Strategy
You will need to determine what type of property you want to invest in and create a strategy and financial plan. You can evaluate a property’s cash flow by running some number equations to see what type of income you will generate. You will also need to determine which type of real estate investments you are interested in managing. The five different types of rental investments are:
Rental Properties. Rental properties make some of the best long-term investments. They offer immediate cash flow and long-term appreciation.
Fix-and-Flip Properties. You buy a property “as is” for a good deal because it needs a lot of repairs and renovations. Fix-it and flip-it is a very popular choice among investors, but it’s best not to do it unless you have gained the needed experience and/or are ready to handle most of the repairs yourself. If you spend too much on contractors to do the work, you might have difficulty selling it at the price you would need in order to make a profit. If you aren’t careful, you may lose money.
Commercial Real Estate. These properties may be used for businesses such as offices, retail shops, and warehouses. They can offer great financial return; however, more risk is involved during an economic downturn. There is also a liability risk, so you will need good insurance for these properties.
Vacation Rentals. Short-term rentals such as Airbnb can be a great investment, but they also have high risks. Vacation properties tend to be seasonal and have high vacancy rates, which means you lose income at certain times of the year.
Real Estate Investment Trusts (REITs). A REIT is a company that operates income-producing real estate. The buy-in is usually lower than traditional real estate, and it’s an easy way to add to your portfolio.
Grow Your Portfolio, Grow Your Financial Freedom
Residential real estate is the easiest and most affordable way to start investing. If you have bigger financial goals, such as becoming a millionaire, you will need to invest in more than residential real estate to build that kind of wealth. If you want to become a millionaire from real estate investing, you will need to buy multiple properties with multiple units. The wealthiest real estate investors usually prefer to purchase commercial real estate or multifamily properties as they usually generate more income.
Once you buy one property, the cash flow and equity make it easier to buy a second property. Buying a second property makes it easier to buy a third, and so on. The more properties you own, the larger your portfolio becomes, and you are better protected from losses.
Contact a Realtor today to learn more and get started on your investment portfolio and your path to financial freedom!