You can make a fortune investing in real estate. No doubt, you've heard about legends like Warren Buffet and more modern tales of real estate rags-to-riches on the internet. But before you can start envisioning yourself as a titan of industry you need to know how to get started -- and how to avoid beginner's mistakes. Wouldn't it be great if there was a secret to give you a leg up on the game?
Well, in this blog post we'll outline a few real estate investment strategies then give you ONE killer tip that could make or break your career as a real estate investor.
Buy and Hold Rental Properties
This strategy involves purchasing a property with the intention of renting it out to generate ongoing income. The idea is that you can purchase an investment property that will provide long-term appreciation as well as short-to-medium-term steady cash flow. You want the asset itself to be worth exponentially more money years down the road, but you also want to generate rental income in the meantime.
This can be a good option if you are looking for passive income, but it requires a significant upfront investment and ongoing management and maintenance. Residential real estate may offer higher upside in terms of appreciation, but will require more hands-on management (or the added cost of hiring a property manager) than commercial real estate.
Flipping Houses
This strategy involves buying a property, renovating it, and then rapidly selling it for a profit. The rationale behind flipping homes is that you believe you possess a keen eye for identifying fixer uppers and have the resources to get it done efficiently. House flippers are often pegged with a blue collar reputation but they are some of the savviest real estate investors around -- it takes talent to turn around land for profit.
This can be a more active form of real estate investing and (obviously) requires a solid understanding of the local real estate market and the ability to identify properties with potential for appreciation. You also need to be able to work quickly, as you need to turn these over much faster than you would hold rental real estate. Even if you can acquire properties and fix them up without the aid of real estate developers, you will still need expert assistance to get it sold for a high price.
REITs (Real Estate Investment Trusts) and Crowdfunding
REITs are companies that own and operate income-generating real estate, such as shopping malls, apartment buildings, and office buildings. Investors can buy shares in a real estate investment trust and receive a portion of the profits from the real estate holdings.
REITs offer a more diversified and passive way to invest in real estate, but they may not offer the same level of control or potential for appreciation as owning a physical property. The biggest drawback of a REIT is that you have little to no say in the overall investment strategy. The fund manager oversees all the real estate investing activities, so if you disagree with their portfolio decisions you may be out of luck.
Online platforms (such as Fundrise and Roofstock) allow investors to pool their money and invest in a portfolio of real estate properties, either through a REIT or directly in individual properties. This can be a more accessible way for individuals to invest in real estate, but it may come with higher fees and less control over the specific properties in which you are investing. In a sense, this form of real estate investing is more akin to purchasing shares in the stock market or mutual funds.
The One Secret You Need to Know
So far you've heard a few pros and cons of the traditional ways to invest in real estate. But what you really want to know is the trick to give yourself an edge. Here it is.
The biggest killer of real estate success is the sum of all the fees, expenses, and hidden costs that hurt your bottom line.
That's right, it's truly death by a thousand paper cuts when it comes to buying, holding, and selling real estate. There are so many gotchas that no single investor can fully consider when it comes to owning real estate: brutal property taxes, fluctuating real estate values, escalating mortgage payments, capital gains taxes, variable interest rates, and more. But there's a sure fire way to make certain you sidestep the pitfalls and build wealth the smart way.
Enlisting a top real estate agent is the best way to make the most money from your real estate investments. Wait, what?
That's right, it might seem counterintuitive to take on another service that comes at a cost, but hear us out. The best, most experienced career agents have insight that is absolutely worth its weight in gold. Elite agents can advise you through everything, so you optimize your net proceeds every time. Whenever real estate investors hire a friend with a real estate license, or try to cut out an agent entirely, they end up costing themselves so much money. It's an open secret that selling a property with a top agent commands a much higher purchase price than doing so without one. So that 2-3% commission you think you're "saving" is actually hurting you in the long term.
Here's the best part. What if we told you there was a way to find, connect with, and make the top local agents compete for your business?
You have heard of online real estate platforms before, but TrueParity is the only one that keeps the mediocre agents out and makes the best ones actually compete to get you the best terms. See for yourself, and thank us later when your make a fortune in real estate!
Ready to start investing in real estate? Connect with the best agents in your area to see how much money they will make for you, at TrueParity.
