How to Get Rich in Real Estate – 4 Investing Strategies
There are several answers to the question above. Real estate business is a vast industry. The real estate business has in fact been in existence for thousands of years. But the real question remains, how to get rich in real estate? Before we begin to explain more, take into account the fact that over 90% of all millionaires across the world has invested in real estate. Why? Because it can. It can only if they’re done with proper research and knowledge. The real estate investing could really make people rich. Below are some of the most common ways of how to get rich in real estate.
1) Fix & Flip
The fix & flip strategy requires investor to a) purchase an investment property, b) fix it c) and then sell it for a profit. But, how to identify good investment property? Easy, the property:
a)Must be in bad condition.
b)Is affordably cheap.
What happens next? You buy the property, allocate some money for its renovation cost and sell it at a much higher price. Bear in mind that the total cost of purchase and renovation, must be lowered than the price at which you intend to sell it.
Advantage: It requires the short amount of time to complete one investment. Properties that are in bad condition aren’t likely to attract investors. You can make use of this opportunity to make a profit out of properties no investor wanted.
Disadvantage: The total cost of purchase and renovation can be altogether expensive. You might be unable to make a profit out of such properties
2) Become a landlord
You can become a landlord. But this strategy however requires more time and effort before it could generate comfortable profit. What do you need to do? Buy an investment property and turn them into a rental property. How do we make money out of this? You rent this property out to tenants. The tenants pay you the rent on a monthly basis. The monthly maintenance cost of the property should be lower than the rent you receive at the end of each month. If your property is able to generate profit more than its maintenance cost, then the property is a positive cash flow property. What determines its profitability or return on investment?
-Cash on Cash Return
How to calculate these metrics?
Cap Rate = NOI (Net Operating Income)/Current Market Value x 100
Cash on Cash Return: NOI /Cash Invested x 100
Advantage: You’re able to generate passive income. This income can then be used to pay off the mortgage. Once the mortgage is fully paid off, you will get to earn the total amount of the rent.
Disadvantage: Becoming a landlord is no easy task. They’re not meant for everyone. Being a landlord requires a large amount of time and energy. As a landlord, you have to tend to the tenants. Not to mention the time and effort it would take to keep the property occupied. Not forgetting the money you need to invest to make sure the property is always in good condition.
3) Buy and hold
The buy and hold strategy works like this. You purchase an investment property and keep it for a period of time until its value increases. What happens once its value has increased? You can sell it for a profit. The strategy requires you to do nothing but wait for its value to increase.
Advantage: An easy strategy that requires neither time nor effort. The investor has total control over what to do with the property. While holding the property, the investor might as well rent the property out to tenants.
Disadvantage: The waiting. You have to wait for a long period of time until the property becomes profitable. Not to mention that you can hardly predict the housing market.
REIT works similarly like stocks. This strategy is thus perfect for real estate investors who are interested in generating a passive income through real estate investing. The investor invests in REIT, the REIT then uses that money to invest in properties. Profit or dividend obtained from such investment will then be divided equally among participating investors.
Advantage: Investing in REIT is less risky as opposed to you investing in properties yourself. This is because REIT will conduct a comprehensive analysis before it chooses to invest in any property.
Disadvantage: You have no control over your investment. Like it or not, you may have to place your trust in REIT to manage your investments.
To sum up
There are several other strategies you can use. No matter which strategy, conduct extensive research before you choose any of them. Choose the one that suits you. Strategies that we mentioned here on how to get rich in real estate are some of the simple ways to make money in real estate. Within each of these strategies, there are several methods to do them. Strategies within strategies. Whatever you choose, make sure you do a lot of research about them.