Why Real Estate Is One of the Best Ways to Make Money
The phrase ‘safe as houses’ doesn’t quite have the same ring to it these days. The catastrophic collapse of the housing bubble over a decade ago was the precipitating event of the Great Recession, after all.
Faith in the housing market has never quite recovered.
Real estate prices in the United States are sitting roughly 20% below the 2006 peak (adjusted for inflation). The UK, which was seeing a very slow recovery, is now experiencing a fall of property prices by an average of £5k. Heck, even the recession-proof Australian property market has seen price dives in recent months.
Nevertheless, this house argues that real estate remains one of the best ways to make money - even in post-recession 2018. Here’s why.
The Unique Benefits of Real Estate
Real estate isn’t a ‘sure thing’, just like any other investment. Nevertheless, it has some very real advantages over other investments such as the stock market:
Tangible Assets. No matter what happens, you’ll always have your brick and mortar. Bitcoin and Ethereum are currently nose-diving into the ether, while stocks can disintegrate on your computer screen in the blink of an eye. Real estate, on the other hand, is something you can see and touch. Even if the market collapses once again, it’s not going to go down to zero.
Not (Quite As!) Complicated. You don’t need to be a math prodigy to invest in real estate. It’s far simpler to understand compared to stocks, startups, or cryptocurrency. Because you’re dealing with a tangible asset, it’s much easier to get started as a real estate investor.
You can Live in Your Investment. Even if you don’t want to become a real estate mogul, you can make some serious money in this industry. By living in your own house you’re already increasing your net worth, just by making your usual monthly payments.
There’s More Than One Way to Skin a Cat
The Average Joe tends to limit the financial gain of property to two simple ways: a) buying low and selling high and b) rental. While those are legitimate ways to see real estate investment, they’re only the tip of the iceberg. There are loads of ways you can make money on a property.
Growing Equity. Paying rent means you’re paying someone else’s mortgage, period. Whether you’re planning on renting out your property or living in it yourself, making those monthly payments will drive your net worth upwards every single month.
Long-term Rentals. This is one of the most common options in real estate investment, and also one of the most reliable. As long as you stick to the ‘location, location, location’ mantra, there’ll always be someone that is willing to pay your mortgage for you through their rental payments.
Lease to Buy. Not available in all countries, but common practice in the United States. This option involves renting a property with the option to buy. This works extremely well in a climbing economy, as it means you will get a hefty discount (compared to current market prices) should you decide to purchase the property.
The Renovate and Flip. Known as the fix-and-flip, this is the perfect investment for someone that has DIY skills, for example. For those that have experience in the industry, this method is a certifiable goldmine.
The top tip we can give you is to find the homes with the most upward potential while sticking to nice neighborhoods. Always ensure you’re buying in a nice area, otherwise, you run a real risk that you won’t be able to get rid of your investment.
You should try and have two things in place. First, good relationships with both contractors and real estate agents. You want to be first in line when it comes to value and you want honest contractors who will give you a good, honest deal and relatively accurate time estimates for the job (relatively being the operative word, contractors are always off with their estimates!).
Vacation rentals. AirBnB has made vacation rentals a very lucrative business for those who know how to do it right. Places such as Los Angeles, San Francisco, and London are what passive income dreams are made of.
You can even do this with your own property. Think sporting events, festivals (e.g. the ever-popular Edinburgh Fringe Festival), and summer swaps. In Edinburgh, for example, some savvy entrepreneurs rent their homes for 2 months over the summer and make enough to cover the mortgage for the rest of the year.
Now that’s good business.