Chip and Joanna Gaines make it look so easy. If you’re remotely interested in real estate you’ve probably watched at least one episode of Fixer Upper. Genuinely, the power couple from Waco, Texas make it look so simple you think anybody in the world could buy a house, have your own “Demo Day,” throw up some ship-lap, and turn a profit on your recently rehabbed property. The fact of the matter is, it’s not as easy as it looks on a 60 minute TV show; but that doesn’t mean that you can’t do it too.
Real estate, like any profession is really its own world. It has its own language, its own set of rules and regulations, and its own list of unwritten rules. It can be incredibly intimidating when you start looking at everything that real estate includes. Fortunately, investing in real estate isn’t quite like investing in the New York Stock Exchange; here you don’t have to watch daily fluctuations in value, and you don’t have to deal with income forecasts of Fortune 500 companies. To get into real estate investment you literally need to find one property! Do your homework on a city that you’re interested in, then narrow that down to a town that is seeing an increase in home purchases, and find a home that you want to turn into the launching pad of your real estate investment business.
Perhaps you’ve always been interested in the real estate industry; that makes your transition into the world of property investment a relatively logical move. However, the beauty of real estate investing is that it doesn’t have to just be for people who have always found themselves drawn to it. No matter your level of interest, real estate investing is a good move for you financially. But how do you get started? Any why should you even bother?
Why Investing in Real Estate Matters
Before we get into the “how” we should quickly take a look at the “why.” Ultimately, investing in real estate makes sense because in general, real estate makes money. The value of real estate is generally found in 3 basic principles: scarcity, durability, and demand. The logic of investing in real estate can be broken down under those 3 reasons pretty easily.
- Scarcity-There is never going to be more land in the world than there is right now. While buildings may be constructed, torn down, and new ones built up, owning property will always provide value.
- Durability-How ever old you believe the Earth is, the fact of the matter is that there has always been land; therefore, there has always been real estate.
- Demand-Land is finite. The fact that land is never going to completely go away means that as long as there are humans on Earth, there will be a need to have land.
Those 3 principles indicate that investing your money in real estate could have long term profitability for you whether you own one piece of real estate or one hundred. The primary reason to invest in real estate is the same primary reason behind any investment. You want to make money! Since 1970, real estate investments have an average annual return of over 11%, making it a much safer bet than most investments.
Real estate investment has proven to be one of the quickest ways to build wealth. According to Forbes, there are 220 billionaires in the world today that have real estate investments. I’m not saying that you’ll have your own show on HGTV, and I’m not going to guarantee that you’ll reach a billion dollars in net worth. But I do know that you can build personal wealth through real estate investing.
How Do You Invest in Real Estate
But now that you have your “why” (MONEY!), what do you do about the “how?” As is the case with any investment, do your homework. While land is both limited in amount but always in demand, some areas are more likely to return a higher rate of return than others. It’s vital that you do some research to find the right area and the right home to buy as your first investment. If you find an area where homes are cheap but the population is in steady decline, it’s going to be hard to turn a profit, even on an inexpensive home. If you find an area that is growing population-wise at a steady rate, the homes may cost a little more, but you’re going to have a much easier time finding a buyer.
Moreover, stop thinking that you need to have tens of thousands of dollars at your disposal to get started. How much money you need is directly related to your abilities and the resources you have on hand. Obviously money is going to be your most important asset, but your own know-how could also be a huge deal. Also, don’t be afraid to talk to friends and family who may have a special skill set that you don’t have. They may be willing to help you out for little or no money depending on how generous they’re feeling. Use every resource available to you!
Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth. -Theodore Roosevelt
Finally, make sure that you maintain your perspective throughout the entire process. That means that you’re seeing the property that you’re investing in through the eyes of your potential customer as opposed to your eye as an investor. It’s not important to find a property that you would want to live in; it’s important to find a property that someone in the community you’re investing in would want to live in. If the property is in a town full of young couples with no children, you may not need to invest in a 3 bedroom/2 bathroom property; there’s not a demand for it there. Look at every property and make every decision with the customer in mind.
Are there more steps to the world of real estate investing? Absolutely. Will this be easy? Absolutely not. Making money isn’t supposed to be easy. It takes skill, knowledge, and even a little bit of luck. But one thing is certain: a well informed real estate investor can make money. How much money is ultimately up to you.
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