Using Real Estate To Build Extreme Wealth
Updated: Jan 23
Real estate is one of those things you should be considering early on in your life. There’s only a fixed amount of land on our precious earth, which means when it comes to finite resources, owning some of that land or property is always a good idea. The problem that we sometimes face is the fact that it can seem too far ahead in our investment portfolio, with properties averaging in the hundreds of thousands of dollars and in some cities well over the million dollar mark such as Toronto where we currently live.
This may seem unachievable early on, but with focus and discipline, you can easily achieve your goal of homeownership early on and begin your journey for that extreme wealth that comes from real estate.
The sooner you start being a homeowner, the sooner you stop paying that thing called rent, and every monthly payment on a mortgage is a monthly investment into your future. That’s right, even if you get a mortgage or an FHA mortgage with a minimal down payment, it is still a better option than rent solely due to the fact that it is an investment.
Every payment you make increases the value of your home. On top of that, the home appreciates in value as well. Just imagine that growth potential!
Beginning Your Real Estate Investment Journey
You are already investing by being a homeowner, but now it's time to move up ahead and become an advanced investor and that means getting your second property or renting out a portion of your current property.
There are multiple routes to go about this. Before anything it’s important that you've done thorough research with relevant terms. Motley Million Acres is a great place to start your real estate terminology, investment strategy and understanding. You could refinance your current property to get the funding for your investment property down payment or you could simply apply for another mortgage and purchase a secondary property due to your fiscally responsible budgeting. However you decide to finance, now your property starts making money for you.
Don’t worry if you had to get a mortgage for your investment property. You may think now you have two monthly payments but remember that the whole reason for your second property is to start renting it out. That means getting someone else to pay that second mortgage every month for you. Simple right?
Depending on the market you’re in, the rent amount you may charge could be higher than the mortgage and thus you can earn a little bit of income after the matter. Use that money to start saving because guess what? It’s time to continue purchasing rental properties.
Now you have some assets with different values so you can continue leveraging them for more properties to rent out and eventually when they are paid down, your wealth will start to achieve that extreme level.
Keep in mind that you don't always have to rent out properties the traditional way, and may even consider your investment property to be in a hot tourist/vacation area. Then you're free to use those wonderful online booking services such as Airbnb, VRBO, or even booking.com.
This is a great way to collect more per month than you would with a traditional rental agreement and have a way to keep it fully booked, keeping that income from your rental properties flowing generously.
Another great way of real estate investing is house flipping. Motley Million Acres is a great reference on providing house flipping tips and tricks that help you maximize your returns in that area. They will help you go beyond the basics with some fantastic inside strategies to help maximize your profits. The basic concept goes that you find a property at a steal.
Sometimes people are motivated to sell at a below market value (especially if you're able to incentivize them with all-cash deals, or other ways to help speed up the process), or these homes may be in foreclosure and the entity that owns that property due to it being in foreclosure is simply trying to recover their original principle. Then, it's all about preparing it for sale and then flipping it back out onto the market!
Another type of property is what they call a fixer-upper. This is where the property could be worth more but requires some remodelling, repairs and some general construction. These types of properties come in high levels of disarray so they are sold well below market value.
The cost of repairing it and getting it back up to its proper value plus the price you paid for it usually still ends up being significantly lower than the price you'll be able to get when you sell it again. It's always good to have a general contractor as a good friend or some handyman skills yourself. Anything that will help reduce your costs in fixing it, just to improve your margins.
Investing in Real Estate Online
Maybe you don't feel like owning the physical properties yourself but are simply there to earn those wonderful dividends that most real estate investment trusts or REITs offer on the stock market. Some of these even pay dividends monthly, so by simply buying shares of the stock, you are already collecting income every month through dividends.
This removes the hassle of maintaining the property, renting it out, handling mortgages or even selling it in the end. All of this can be done from the comfort of your home online and could be even a perfect investment scenario for the introvert in all of us.
There are some platforms out there that are also offering fractional ownership to properties. In the end, though they are very similar in structure to REITs, as in you purchase an amount of ownership and receive dividends every month, it simply just comes in a different flavour.
Keep in mind these are investment vehicles beyond common real estate. Million Acres does a good job explaining your options and potential investment strategies as they are also powered by one of the best investment research platforms, The Motley Fool.
Commercial Real Estate
This is the big leagues and can be very lucrative to hit that extreme wealth because commercial real estate is not where you charge a couple of thousand dollars per month rent, but start talking about charging tens to hundreds of thousands of dollars per month depending on where the location is and what type of commercial property you're renting.
Is it retail or office space? Either way, this is a whole different ball game that should only be approached after handling a few rental and vacation properties. Don’t let this dissuade you in any way, just see this as the next step on your journey for real estate investing.
Real Estate Is For Everyone Who Wants It
Remember that the only way you can get into real estate investing is by simply trying to do it. With that mindset at the forefront of your investment strategy, you won't be able to be stopped and you will be able to enter into that world sooner than later.
There’s also a growing trend nowadays where friends and family are getting together and working on co-owning properties, even while some of the parties are renting, simply due to the fact that they are starting to see that the sooner one starts, the sooner the income and cashflows comes in to continue with the investment strategy.
Don’t worry what markets may say as well, because in the long run the housing market always have a way of recovering, since in the end, there will always be a need to rent out a property to someone. If common strategies aren’t even, we always recommend using Motley Million Acres as your research tool for real estate investments and they will have insights for markets of any strength and size.