Just as buying stocks is a great way to grow wealth, so too might you enjoy your share of success investing in real estate. And if you make these specific moves, you might really wind up happy with your decisions down the line.
1. Holding income properties for a long time
One of the best wealth-building strategies within the realm of stocks is to invest in quality companies and hold onto those shares for many years, thereby allowing them to gain value over time. Well, that “buy-and-hold” strategy works equally well with real estate investing.
Homes have a tendency to gain value over time. And so, if you buy income properties and hold them for many years, there’s a good chance you’ll end up with some nice profits on your hands.
2. Resisting the urge to make a quick buck flipping houses
Income properties can improve your cash flow, but there’s a cost to maintaining them. And, as mentioned earlier, you may need to hang onto them for a long time before you sell them and enjoy your gains.
That’s why so many investors are drawn to house flipping. The whole point of flipping houses is to buy a property in disarray, renovate it, and then turn a quick profit rather than wait years to make a pile of cash.
It’s a good idea in theory — but it can be risky in practice. If you’re not a seasoned house flipper, you could end up spending a lot more money to fix up a home than anticipated, thereby eating into your profits. You’ll also need to make certain to purchase a home in the right market. If you buy in an area with lots of competition, you may not get a high enough price to recoup your own costs.
This isn’t to say that you can’t make money flipping homes — many investors do. Rather, you shouldn’t rush into the process. Instead, take plenty of time to learn about how to flip houses successfully and consider partnering with someone experienced instead of flipping your first home solo.
3. Loading your portfolio with REITs
There are costs involved in owning physical properties, and often, owning them requires a time commitment. Buying REITs, on the other hand, is a much simpler process.
REITs, or real estate investment trusts, are companies that operate different types of properties, and many REITs trade publicly. That means you can buy and sell them the same as regular stocks.
The upside of owning REITs is twofold. First, REITs tend to pay higher-than-average dividends, so those could serve as steady income you keep or reinvest.
But also, just as stocks can gain value over time, so too can REITs. And if you hold yours for many years, you might benefit nicely from share price appreciation.
Your choices could really pay off
Investing in real estate could make you quite wealthy — if you play your cards right. It pays to consider these moves if you’re new to real estate and want to set yourself on a successful path.