Investing is the key to building wealth. If you don’t own assets that can appreciate in value, then your nest egg is doomed to shrink thanks to inflation. For those who can afford to enter the real estate market, owning a real estate property is one of the most powerful ways to invest. Here’s the how and why of owning real estate as an investment.
Why real estate?
It’s common knowledge that buying a home, rather than renting it, can be a more financial sound decision. While rent payments disappear, mortgage payments offer a homeowner more in exchange, and they go towards the acquisition of a large, valuable asset.
Real estate works as an investment because it offers the chance for you to build wealth by owning a property that increases in value. And when your real estate investment is a property that you don’t live in, you can also gain extra income from it by renting it out. Such investment properties are called “income properties,” and they offer investors a great chance to enjoy short-term profits from a long-term investment.
And there are plenty of sources of income out there for you right now. With more people renting than ever, there’s certainly no shortage of tenants, which means that it’s easier than ever to find good ones. It’s a great time to be in the real estate business.
Investing in the right property
Of course, profiting from an income property involves some work. And that work begins before you invest in the property. Be sure to do your research, and then ask yourself: do you have reasons to believe that this income property will attract renters and grow in value over time?
Calculate how much you can afford, and work with mortgage lenders to secure the deal for your new income property. Consider making key upgrades to the space, because a few smart renovations can make your space much more appealing to renters.
Securing your real estate business
Once you have your first income property, you’re running a kind of real estate business. Make sure that you set that business up properly with the help of an attorney. As much as possible, you want your personal finances separated from the ups and downs of your business.
Make sure that you get insurance coverage too. Landlord insurance is an absolute must for income properties. And don’t forget to invest in routine and preventative maintenance, which will help your property stay profitable and maintain its value. In the long run, deferring maintenance will only cost you more.
Getting the right tenants
Few thing are as important to the success of your income property as the quality of your tenants. Good tenants will play an active role in caring for the space and they’ll pay rent on time. Bad ones will do just the opposite, putting your space at risk.
To get the right tenants, you need to find them where they are. And where they are is online. The vast majority of would-be tenants are searching for their next living situation online, so make sure that your property is posted on online real estate boards. Make it easy to apply, too. A good landlord website or app will help you set up a simple rental application for would-be tenants to use. You should also be able to perform background checks to ensure that your tenant is a keeper.
A smart investment
Running an income property isn’t easy, but it can be immensely profitable. If you’re careful about your decisions and faithful with your care, your property will deliver you big profits and long-term equity.