Why Invest in Real Estate?
Many people ask, “How do I use real estate as an investment?” There are many advantages to real estate investing that make it more attractive to the average investor. In addition to the high rate of return, real estate investment is also beneficial for the investor’s tax situation, diversification, and freedom. Here are a few reasons to consider making this kind of investment.
Appreciation in Real Estate
Real Estate as an investment is a powerful wealth opportunity. First, you can take advantage of the rising cost of housing in the U.S. housing market. The government is actively investing alongside your hard-earned dollars through low-interest rates. Another reason to consider real estate investment is the potential for long-term wealth creation. A quality rental portfolio can build actual wealth. Nearly 80 percent of total U.S. real estate returns are derived from income flows. In addition, real estate investment offers a low correlation with stocks and other types of investments. Renting properties can increase the investor’s income to help diversify an investor’s overall portfolio.
You can use the equity in your home to finance renovations, purchase a rental property, or pay off the high-interest credit cards. This is a powerful financial strategy utilizing lower interest rates on home equity and tax advantages.
The most significant benefit of real estate is the leverage it offers investors. For example, if you’re planning to use the property to rent out to others, it’s wise to use a mortgage that allows you to borrow a more significant percentage of the property’s value.
What Are Some Real Estate Investing Strategies?
If you are looking to invest in real estate, you have probably wondered: what are some of the best strategies to follow? There are several strategies to consider before starting a real estate business. A good idea is to start small and work your way up. Once you’ve gained some experience, you can move on to more complicated projects.
The fix and flop strategy is to find an undervalued property and fix it up before selling it. This is a suitable method if you’re looking to cash out quickly.
Many people use this strategy to acquire properties that have appreciation potential. The idea is to estimate the costs of renovations needed, and if the buying price + renovations make sense to maximize the property value to sell at a profit. it can be a potential property deal.
The second strategy is to buy and hold. While this strategy is more passive, it is also highly profitable. While holding, you would rent the home for rental income. This type of real estate investment is a long-term strategy and involves purchasing a property without the intention of selling it in the short term. Buying and holding will ensure that you have a steady income and appreciation of the property. The value of the properties historically have increased over time.
There are many different strategies you can use to buy real estate. A successful wholesaling process requires time and effort to identify leads and build a pipeline. The best part about this investing strategy is providing a consistent and predictable cash flow. In the long run, this strategy will help you to develop a deeper understanding of real estate concepts and build relationships with professionals in the field.
BRRRR Real Estate As An Investment Strategy
One of the newest strategies is what the industry refers to as BRRRR investing. This is a true real estate as an investment strategy.
So what is BRRRR Investing?
- Buy Property
- Rent the Property
- Refinance with Higher Property Value
- Repeat Process
The BRRRR investment strategy helps you build your rental portfolio by owning multiple properties. It can also help you spread the risks among several rental properties.
The BRRRR method starts with buying a property. The second step is renovating the property in an effort to increase property value. Due to the property being renovated, it will rent at a higher price and will refinance at a higher value. With the refinanced cash out, the investor repeats this process. This is a great way to achieve financial independence.
A BRRRR investment strategy is an excellent way to leverage the cash you already have. After renovation, the property can be sold for a higher price. The money you get from selling it can be used to pay for your next investment property.
A BRRRR investing strategy maximizes profits by buying a distressed property at a significant discount. Such properties are referred to as “distressed” because they are priced well below their potential market value. You refinance the property a year later, taking out a loan for 75 percent of the appraised value. In this way, you can earn passive income and keep your real estate investments in good condition.
They will need to be rehabilitated to generate positive cash flow, just as in a flip. The BRRRR approach is an excellent strategy for aspiring real estate investors.
Unlike the other real estate investing strategies, this method is best for new investors who have the necessary skills to handle renovation work. This investment method allows you to build a cash flow and create a steady income stream for life. It can also be a great way to profit from real estate.
We created this amazing video utilizing real estate as an investment!
Although we do not perform real estate transactions at SDG, we provide financial planning that includes analysis of rental income and asset values. It is imperative to build a well-diversified financial plan that provides diversification in the short and long term. We believe real estate can be a tremendous opportunity for wealth generation and wealth appreciation. We recommend education on utilizing real estate as an investment.
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Sharon Griffin has a reputation for on-point business strategy and economic literacy at SDG Business Consulting. SDG expanded the team to provide risk management analysis and economic leadership. Both SDG Financial Services and SDG Business Consulting are certified with the designations of Women-Owned Business Enterprise (WBE), Minority Business Enterprise (MBE), and Small Business Enterprise (SBE). These distinctions have paved the way for Sharon and her team to branch into the not-for-profit education sector, focusing on providing people with a better understanding of the financial world and how it works.