How does real estate investment work?
Simply buying real estate is not investing in real estate.
Strategically sorting many properties for sale and buying one of many that meets your goals. Every real estate transaction must have one or more of the following to be called real estate. investinstead of real estate speculation:
- Income
- Growth
- tax advantages
- leverage
Here are 4 simple tips to keep in mind as you begin to educate yourself on the real estate investment process:
- Only invest in properties that provide instant capital or strong cash flow. The property you choose to invest in will offer both! “Instant equity” occurs when the use of a property changes, such as when you purchase a distressed property and rehab it to excellent condition. Cash flow is generated by leasing your property to others, which creates an income stream.
- Learn to use OPM – Most investments generally require you to invest all of your own money to get the return. In real estate investing, you can take advantage of other people’s money to invest in real estate. If you invest $100,000 of your own money in a $100,000 property and earn an annual return of $10,000, you’ve earned an ROI (return on investment) of 10%; However, on the same $100,000, if you invest just $20,000 of your own money and borrow the rest ($80,000) and generate an annual return of $5,000, you have earned a 25% return on your original investment of $20,000. .
- Start your real estate investment with clear investment objectives. Remember, just buying a property is not an investment: without clear goals, it could be more speculation, and that’s too risky for most savvy investors. You or your team must have clear objectives for the investment to be successful.
- This brings me to my final advice, which is, “Field Experience” To be successful in real estate investing or almost any other investment, you’ll want to rely on your own experience or the experience of others. If you do not have the knowledge or experience, you can carefully seek the help of others who do and use their experience for your own personal benefit.