Investing in real estate can be a smart way to diversify your investment portfolio, get higher long-term returns, and lower your risk.
This article will share with you how to invest in real estate and what options are available to you.
What Does It Mean to Build Wealth in Real Estate?
Building wealth is about generating long-term income. A job is never going to make you rich – you need to focus on building multiple streams of income.
Building wealth in real estate centers on diversifying and deepening your investment portfolio to build these income sources and to optimize your investment growth.
How to Build Wealth in Real Estate
Building wealth in real estate is about ensuring you get the most out of your investments. The best way to do this is by understanding what your investment options are so you’re not making uninformed mistakes.
Here are seven of the most effective ways to build wealth in real estate:
1. Single Room Rentals
If you’re hesitant about real estate investment or you don’t know where to begin, one of the easiest ways to start is to rent out a room in your home. A roommate is one way to reduce your mortgage payment while getting a feel for the real estate market.
Renting out a single room is relatively simple, as it doesn’t require market research or multiple contracts. All you need is a spare room.
2. Rental Properties
Residential rental properties build wealth in both the short-term and long-term. When managed correctly, rental income will exceed your monthly mortgage and property maintenance expenses. The resulting profit provides a consistent stream of cash flow you can leverage in the short-term.
In the long-term, owning rental properties can allow you to reap a substantial wealth boost from property value appreciation. This means you’re able to collect a large chunk of cash in addition to what you initially put down when you choose to sell.
3. Real Estate Investment Groups (REIGs)
A REIG is a great way to build wealth in real estate without having to be personally responsible for maintaining and managing the investment property yourself. A REIG is a group that focuses on maximizing its investors’ profits through real estate investments.
As a private shareholder of a REIG, you invest capital, and the REIG uses it to cover everything from administration costs to the buying and selling of properties. The more investors a REIG has, the greater the pool of capital available and the greater its ability to invest more broadly. When the group experiences growth, so too does each investor.
4. Real Estate Investment Trusts (REITs)
While a REIT is similar to a REIG, they’re not exactly the same thing. A REIT is a corporation owned and operated by a board of directors. Unlike REIGs, a REIT invests in properties bought and developed as part of an investment portfolio. A REIT must have a minimum of 100 investors, with 50% of the company owned by five or fewer investors.
5. Online Crowdfunding Real Estate Investing Platforms
Online crowdfunding is a new form of real estate investing. Investors pool capital to fund projects or companies in hopes of receiving a future return. Platforms like Fundrise, CrowdStreet, and Yieldstreet have lowered entry barriers with low account minimums and simple structures that make it easy for anyone to invest. Some platforms also provide access to REITs.
6. House Flipping
While it may seem easy to purchase a low-quality home, renovate it, and then resell it for a profit, there’s more to it than meets the eye. If you go down this path, you’ll want to plan strategically. Nevertheless, house flipping can be a great way to see fast returns on a real estate investment.Investors with a background in construction, home renovations, or interior design are at an advantage because they can use their experience to take a more hands-on approach.
Flipping a house isn’t as easy as it looks on TV. Flipping requires planning and careful calculations to ensure you have an accurate estimate of the home’s initial value, the cost of renovations, and the projected new value of the home. The best results come when a team of people works together to combine their expertise in financing, real estate, and construction.
7. Commercial Real Estate (CRE)
Commercial real estate offers many of the same opportunities as residential real estate, but often gets overlooked by investors that think commercial properties are only for “serious” investors. In fact, anyone can invest in commercial properties. Commercial real estate can check all the boxes of a great investment, and the right commercial property can be highly profitable, secure, and low risk.
The Fastest Way to Build Wealth in Real Estate
By far, the best way to build wealth in real estate is by working with a mentor who’s done it all before. A mentor makes investing significantly easier by showing you the path to success and by providing you with a trusted guide to help you avoid the common pitfalls that cause beginners to fail.
As a veteran real estate investor and entrepreneur, Derek Moneyberg has mentored thousands of hard-working individuals to help them build their wealth. Here’s another article sharing his knowledge about how to invest in real estate.
Derek Moneyberg’s Real Estate Riches is a 10-week online course covering everything he has learned in over 30 years of successful investing. It addresses the crucial fundamentals of building your wealth in real estate, and it aims to help you get the most from your investment no matter your age.
See what people are saying about Derek Moneyberg and discover how he has helped them reach their financial goals.