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Assembling Your Real Estate Portfolio to Build Wealth

Many people dream of a life of wealth, but only a few ever take steps to actualize those dreams. Persons hands holding a bunch of small gold eggsBuilding wealth demands hard work, and most people don’t have enough commitment to their goals to make the required sacrifices.

Moreover, when trying to move your life into a place of financial freedom, information matters. You’ll want access to the right people, knowledge, and tools. Without up-to-date insights on how wealth building works, you will struggle.

Your journey to wealth will be arduous if you don’t have the right mentors to show you the most effective methods for achieving your goals. It is especially important to seek guidance when looking to increase your net worth via a portfolio of real estate investments.

Building wealth through real estate requires know-how, and you’ll want to access information about methods successfully used by other investors. The tips they share with you will let you leapfrog the stage of failing or succeeding by trial and error.

This post highlights some strategies that can enable you to reach the kind of results obtained by the savviest investors. If you understand, master, and do them repeatedly, you will be surprised at how quickly you arrive at your financial goals.

These strategies are divided into categories. Do not try to use them all, at least not at the beginning of your investing journey. Choose the most effective methods for you based on how much time and capital you have. Also, consider your expertise, age, and goals.

 

Direct real estate investment strategies

·         Buy-and-hold to earn rental income

Living room with brown leather couch, blue accents, and green plantsThis long-term strategy is the most sustainable way to make money from real estate. It demands more commitment than other methods but offers more rewards in the long run.

Using this method, you:

      • Buy a property, renovate, and rent it out to tenants. Make sure to implement apartment SEO strategies to get the best tenants.
      • You then pay for the monthly mortgage and other costs – insurance, taxes, and maintenance – with money from the rent.
      • Lastly, you hold the property for life or sell it when it is free and clear, or its value has increased significantly.

The pros of this method are:

      • Your tenants finance the investment.
      • In addition to making profits from the rent, you gain long-term appreciation.
      • Long-term rental properties get the most tax benefits.

 

·        Flipping houses

To flip a house, you buy it, improve its value, and then turn around to sell it for profit. This short-term strategy is based on forced appreciation. The property you buy may either be in disrepair or completely livable. What matters is the ability to increase the market value through your improvements.

The benefit of flipping houses is that you make a lot of money quickly. But to use this method, you must know how to evaluate the physical condition of a building, manage a home remodeling project, and have a good understanding of your housing market.

 

·        Rent-to-own

The rent-to-own strategy (or lease-option contract) merges the best aspects of buy-and-hold with the benefits of flipping. With this method, you lease the property to a tenant while simultaneously entering an agreement to sell the property to that tenant.Row of houses with varying colors

This arrangement gives your tenant an option to purchase the home in the future at a predetermined price (typically higher than the market value). The tenant pays a higher rent than normal, and you have a steady stream of rental income (no risk of vacancies), along with a buyer lined up to buy the property.

 

·        Investing in land

Buying land is a different kind of buy-and-hold. Rather than earning from rent and long-term appreciation, here, you only make money when the asset appreciates. This method involves buying bare land in a remote area, typically undeveloped or underdeveloped.

This method is for investors who have a lot of funds they don’t have an immediate use for, and it requires a lot of patience. The land is often located in an area with low demand, far away from an urban center yet close enough that development will force the price of the land up in a few years.

 

Indirect strategies for investing in real estate

·        Real Estate Investment Trust (REIT)

Open space office and people sitting at a long tableREITs are private or public companies that own or finance real estate investments. Individual investors buy a piece of a REIT, giving the trust a pool of funds to invest in a wide range of real estate projects.

REITs are perfect for investors who don’t have the time or know-how to manage a real estate investment directly. REITs also have the kind of liquidity that is not available to investors in direct real estate investments. The downside of REITS is they are subject to the same volatility as stocks.

To sum up, these are not the only ways to build wealth with real estate. Other strategies worth looking at are vendor take-back mortgages, investing in second mortgages, and accredited investor funds.

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