Supplement Your Income: A Simple Way to Get Started in Real Estate
Investing in real estate appears to be fairly easy: you buy property and then rent it out. Since the tenants will cover the rent, the property will be free and clear after a few years. So, as long as the lights turn on and the water flows through the faucets and as long as the rent gets paid, then it works out for everyone.
Unfortunately, this common view of real estate’s is a gross oversimplification. While renting property is one way to make money from real estate, there are many other types of investments. These are classified as residential, commercial, and industrial, with each a complex world in itself. Basically, however, residential real estate includes buying a single-family house to rent to tenants; commercial real estate includes buying an office building to rent businesses; and industrial real estate includes buying a warehouse to rent to manufacturers.
There are also other types of real estate—like buying property on the stock exchange through real estate investment trusts or investing in businesses related to real estate, like tax lien certificates.
Protect Your Wealth
Regardless of the type of real estate you are interested in, you should never own it under your own name. If you’re serious about the real estate market, then you should treat it like a business and secure a real estate LLC. A limited liability company will protect you from all sorts of misfortune that could ruin you, like a lawsuit or some other danger. When building your wealth, you need to use a risk management strategy.
If you want to invest in real estate, then you should speak to a lawyer to understand how a limited liability company works and why you should use it to hold your real estate investments.
How to Make Money in Real Estate
People get involved in this market for different reasons: some to supplement their retirement; some to diversify their investment portfolios; some as a career opportunity; and some as full-time investors.
Although money does not necessarily buy happiness, you can make a great deal from your real estate investments:
- The first way to make a profit is to wait for your property to increase in value.
- The second way to make a profit is to lease out your property to people looking for a place to live or a place to work.
- The third way is to make a profit is to start a B2B business that supports real estate.
Real estate attracts investors because it is a high-ticket item. This means that it’s possible to make large amounts of money from rentals or sales. It’s also attractive because it can be structured to be a source of passive income. For instance, if you buy an apartment complex, you can hire a property manager to collect rent, deal with difficult tenants, and maintain the property.
A Simple Business Model to Build Wealth
Here is one example of a fairly straightforward way you could make a fortune in this market:
If you’re just starting out, then an easy point of entry may be to buy a single-family home to generate rental income. This business model is fairly easy to grasp and may even remind you of the game of Monopoly.
Once you own a home, you can either rent out the entire house to a single family or rent out each room to different tenants, who will then share common spaces like the living room, kitchen, and bathrooms.
When it comes to maintaining the property, you can do the maintenance work yourself or supervise the work of a maintenance crew you’ve assembled.
If you don’t want to deal with finding tenants or taking care of the property, then you could take a cut in your profits and outsource out to a third-party property management firm.
After you have successfully managed one property and learned how to get tenants, deal with tenant issues, and maintain the property to everyone’s satisfaction, then you could rinse and repeat with another single-family home. In this way, you could own a number of homes to rent out.
In conclusion, real estate has an attractive upside and its possible to make large amounts of passive income. However, this is only true if you go about it the right way, which includes using risk management practices.