– Crystal Vagnier – Select Group – Writer/Editor
Generating real estate wealth can be a long and tedious process. In order to turn a profit, one must make the right decisions when it comes to buying or selling. It’s all about timing, knowledge, opportunity, and location. With the correct moves, substantial long-term wealth can be created with a strategic combination of investments and rentals. Here are the top 10 tips to help build your real estate wealth.
- Start Small. Having patience is key. Building wealth will naturally take time and it will not happen overnight. All it takes is a single property or investment. Consider average or low-cost properties rather than consolidating expensive properties. It is uncertain that the costly property will automatically generate a significant return; keeping expectations manageable is a safer risk-free approach to gradually building your returns and wealth.
- Use Other Money. It’s guaranteed that you will not have enough money to maintain your venture. Running out of cash, despite how much you may have, is inevitable. When you’re just starting out, seeking out potential investors to combine your resources will make a long-term difference in what you’re able to take home and save for the long run.
- Start-Up Equity. “Sweat Equity” is the difference between the original purchase amount and the increased value post-restoration/improvements of a property. So, if a $130,000 property sees $20,000 worth of updated repairs, this now-remodeled home has an increased worth of $200,000. The sweat equity created is now $50,000. This is a great way to increase your long-term wealth.
- Physically altering a property’s value with improvements can increase its value. Appreciation is not always a guarantee, but on average, real estate prices have increased steadily, indicating that as trends go and from improving the aesthetics of a property, a profit is foreseeable.
- Cash Flow. The income received from rentals can create positive monthly revenue. While cash flow is not always a reliable measure of income, keeping track of upkeep expenses (taxes, mortgage, repairs, insurance, and vacancy) is useful in implementing a system where you begin to take in more than what you spend. Again, this will not always be a consistent pattern, but extra income from rental properties you own can be a very useful way to generate extra wealth.
- Buying up rental properties is an effective way to build wealth. The beginning will be slow and will not include a lot of up-front income. The goal is to pay off any debt and save the money that does come in so that your income from the rentals becomes 100% yours to take home. Your investment then becomes a high income, low-risk transaction, and one that will enable you to reinvest further down the line.
- Loan Pay-Down. One way to pay off a mortgage is to have your tenants do the work for you. With time, your tenant will essentially be helping you build your wealth with every monthly payment by paying down your loan.
- Tax Benefits. The United States government provides many incentives for real estate investors by offering extra tax write-offs and deductions. By paying fewer taxes than other business owners, investors can put the acquired extra money into new developments and the purchasing of new properties. It’s wise to work with a tax advisor to confirm you are utilizing the most of your available tax benefits. You can also defer taxes on rental properties by using a 1031 Tax Deferred Exchange or a Self-Directed IRA.
- Build Your Network. People love working with those who are friendly, ethical, and knowledgeable. How many times have you found yourself frequenting a business solely based on your long-lasting and trusting relationship with someone? If you treat your expanding network in a likeable and honest manner, you’ll find that your network will increasingly grow and ideally before it’s necessary for you to tap into.
- Creating a niche is always the best approach. Honing on a specific expertise will help you stand out from the others. You want your name to be the first that someone thinks of for a particular field. Make a name for yourself, you’ll find that it’s powerful.
With the Select Group of Companies, you have access to a variety of mortgage offices and property management facilities, like Select Property Management and Stanford Mortgage. Tap into the plethora of resources you have just waiting for you today!