Real estate has always been one of the most valuable assets someone can own. The fact that there is only a predetermined amount of space we have to split up between ourselves means that land and the homes and buildings on it will always be extraordinarily valuable. You would, in all likelihood, rather live next to the ocean on a private white sand beach than in an overcrowded area of town next to the city dump, right? Also, consider that our population is continually growing and our world globalizing, meaning that as time goes on, there will be less land available per person. Real estate will continue to be an excellent investment because of this, but where do you start?
Here are three tips to ensure that you make the smartest investment with your money that leaves you passively building wealth for years to come!
Think Ahead
One of the best ways to find a great deal on real estate that will undoubtedly be a good investment of your time and money is to purchase land or housing in areas that border desirable regions but are not in and of themselves desirable. (yet!) This is a common strategy for many who are hoping to strike gold in their real estate investment but don’t mistake that for meaning it’s no longer a good idea. An excellent strategy is to keep an ear to the ground for significant events planned for a given area of town or even city. Major companies moving to a city can cause a considerable influx of affluent employees moving to the area that will all need space of their own. Simple supply and demand show that property values in the surrounding areas will increase as a result. The same goes for major construction, such as conference centers or stadiums!
Generate Income
The most significant gains in real estate investment come over more extended periods. This does not mean that you cannot generate income right away, though! Investing in multiple unit housing and retail space will pay you a monthly rent to occupy your space. The beauty of this is that you can use that monthly income to pay the mortgage on your loan or even reinvest elsewhere if you already own the property full and clear! Finding a property that can generate the monthly income needed to pay for itself leaves you in the driver seat to collect on the appreciation over time and capitalize on all of the principle you have paid towards your loan when it comes time to sell!
Patience Matters
Perhaps the most challenging aspect of real estate investment is having the patience to ride out the storm when the market slows down. The real estate market operates on a relatively predictable growth cycle. Unfortunately, this means that there will be periods where property value growth slows or even depreciates. This is where it becomes critical that you have the patience, and ability, to ride out the storm. Over a long enough window it is an almost certainty that a smart investment will pay off, but cashing out early can make the difference between a brilliant decision and one that leaves you breaking even. (or worse!)
On a more macro scale, it’s also critically important to consider the housing market as a whole. The fact of the matter is that the housing market will expand and contract over time; most real estate agents know this to be approximately every seven years. If you are able to buy when the market is contracted and prices are lower relative to overall lifetime value, you set yourself up for additional gains in the long term. Additionally, patience can pay when it comes to interest rates. Applying for a mortgage loan can be confusing, but one number you really need to understand is the interest rate and how it will affect your payment. It should become quickly obvious that a lower rate is advantageous because you pay less money in interest every month. Just like the real estate market, the financial markets have periods of higher and lower rates (on average). By using a bit of strategic patience here you can save yourself tens or hundreds of thousands of dollars!
Real estate investment is an excellent investment strategy; the returns can be massive, and it is also relatively safe if you’ve planned correctly. With forethought and patience you can make a fortune without any additional work, providing security for you and your loved ones for many years to come!
