There’s no one formula for building wealth; there are many ways to do it. But if you study the careers of wealthy people in this country, you’ll find that an overwhelming percentage have at least some exposure in real estate.
Many of them have substantial portions of their net worth tied up in real property. This is not a coincidence. It reflects the value of real estate as a tool for growing wealth.
The question is, what sets successful investors apart from the rest of the pack?
What Makes Real Estate the Ultimate Wealth Building Tool?
The power of real estate investing is that it’s versatile. Unlike most other assets that generate a single return, real estate puts your capital to work in a variety of ways – simultaneously. They include:
- Cash flow. For starters, real estate investing supplies monthly cash flow in the form of rent. This gives you a direct stream of semi-passive income for as long as you own the property. And considering you may finance the majority of most investments, this can give you pretty impressive cash on cash return.
- Appreciation. Real estate tends to appreciate over time. Though there may be periods when values decline, long-term trajectory shows a firm and upward movement to the right. And all the while your property is increasing in value, you’re generating cash flow.
- Depreciation. When a property’s value is increasing, you also enjoy the benefit of depreciation on the asset. This can lower your tax burden and help you maximize your investments.
- Leverage. Real estate investments give you leverage. When you do it correctly, you can put down some money, get the property where you want it to be, and then pull out the cash and use it elsewhere. Talk about making the most of every dollar!
- Inflation. You also have to consider the value that real estate provides as a hedge against inflation. Money may become worth incrementally less over time, but the majority of your real estate expenses remain fixed. Yet despite this, your rent and property value increase (due to inflation). You get the best of both worlds!
Real estate isn’t perfect – and some people don’t have the resources or stomach for it – but when properly utilized, it has the potential to single-handedly turn you into a wealthy individual.
Five Secrets of Successful Real Estate Investing
In order to take full advantage of the aforementioned benefits of real estate, there are trade secrets you’ll want to implement. These are five of our favorites:
- Take Your Emotions Out of It
To be successful with real estate, you have to remove your emotions from the equation. If you get too hung up on a property and become wedded to the idea of owning it, you’re more apt to make foolish decisions that compromise your ability to generate the ROI required to sustain your investments.
The way to take your feelings out of investing is to depend on mathematical formulas and guidelines that you follow no matter what. We’re not going to tell you exactly which to use – there are many – but having a couple in your back pocket will empower you to make more objective decisions.
Patience is a huge virtue in real estate. Yes, you have to be aggressive in searching for deals, in negotiations, and never taking no for an answer. However, you mustn’t let yourself rush into decisions because you’re impatient.
You might have to put in 50 offers for every one that gets accepted ... and that’s okay. As long as you have your mathematical equations and formulas in play, you can be fairly well assured that you’re making wise offers.
Frustration over quantities of offers should not cloud your commitment to making sure they’re all quality offers.
The most successful real estate investors are the ones who build strong and effective teams around them. If you want to be a successful investor without having every second of your day tied up in monotonous tasks, you’ll want to outsource to other professionals.
A property manager is one great asset that every investor should have. They’ll handle everything from tenant screening and rent collection to property maintenance and accounting.
This goes for every career and industry. If you want to be successful, develop the habit of treating people right. Never forget that, although people may not remember what you did, they’ll always remember how you made them feel.
Tip number five is to diversify. The more doors you can add to your investment portfolio, the less likely it will be that any single property will sink your ROI. Spread out across different locations, property types, and price points. This will insulate you from being exposed in the event of a market downturn.
Putting it All Together
Real estate investing can be rewarding, when approached with the right mindset and disciplined decision-making. Though we’d never encourage anyone to rush into real estate, it’s something to consider as you look for ways to leverage your financial resources.