Last Updated on 18/12/2020 by Steve Wanjie
Real estate investment? Why would you consider investing in real property? This article gives you the answer to this question and the benefits of investing in real estate. Welcome, my friend.
But first in summary form, how will real estate make you money in 2021?
Real estate investment will make money for you in these different ways in 2021 and beyond;
- Rentals—build or buy (and hold) long term residential rental properties
- Leasing—add value to a property you have leased and use it to make money. It could be a piece of land or a building. Add value and use or rent it out to businesses that need space.
- Selling—buy and sell real property for profit
- Develop—buy land, develop housing units, and sell to prospective homeowners
- Land dealer—buy a large piece of land and sub-divide it. Then sell the smaller pieces to people who want to build their own homes.
- Tourist (vacation) rentals—get into agreements with property owners (landlords.) Instead of renting properties, you manage to local individuals or families; you list them with Airbnb. Of course, you need to be in a high traffic tourist location such as Nairobi, Mombasa, Bangkok, Paris, London, Dubai, New York City, Cancun, Miami, Cape Town, Lagos, Zanzibar.
- Hard money lender—these are short term highest interest loans made to real estate borrowers who cannot qualify for normal loans. As a participant in real estate dealing, you come across these types of borrowing deals. You lend and make quick short-term cash.
- Commercial real estate—People need an office and retail space to run their businesses and shops. You develop (or manage) commercial real properties, earn rental income (or management fees) and profits for your efforts.
Do you need capital to invest and make money in real estate?
No, you don’t need starting capital to get into real estate investing. You don’t need any money when starting a career in real estate investing. You need 5 things only. Apart from time, these are the things that you can gain easily through learning and practice. These are the things a young beginner in real estate trading needs;
- Knowledge and the know-how of what you are doing
- Marketing skill
- Communication skill
- Persuasion skill
- Drive and the will to succeed
- A creative mind—helps figure ways around obstacles and challenges instead of giving up
A beginner in real estate:
Contract Flipping-A beginner in real estate has to start as a property broker. You don’t need money to start as a property middle man. You find property owners who want to sell and help them find buyers, or vice versa. You earn a commission, which you determined. If the owner wants 1 million for his or her property, you sell it at 1.2 million to the buyer. The difference, 200K, is your commission.
Established investor looking to invest in real estate:
But if you are blessed to have the capital to invest, you are better off. The load becomes easier. And there is no reason you shouldn’t make a lot of money investing in real property.
Example – You buy a piece of land at 1million and sell it at 3 million a few years down the line.
Table of contents:
- What is real estate?
- What is real estate business?
- What is an investment?
- What is real estate investment?
- How does real estate investment work?
- Is real estate investment worth it?
- Why real estate investment is good
- What are the types of real estate investment?
- Which real estate investment is the best?
- What is real estate?
According to investopedia.com;
“Real estate is the land along with any permanent improvements attached to the land, whether natural or man-made-including water, trees, minerals, buildings, homes, fences and bridges. Real estate is a form of real property.”
- According to thebalance.com;
Real estate is “the property, land, buildings, air rights above the land and underground rights below the land.”
According to these two definitions, real estate seems to be a very interest thing to own. What they are not telling us, who owns the world life on the land, such as worms, insects, birds living in those trees. What do you think, my friend? Once you buy the property, do the birds living in those trees belong to you too?
2. What is real estate business in 2021?
A real estate business is an income-generating enterprise trading in the property market dealing in the investing, owning, holding, buying, selling, managing, and facilitating the movement of real property from a seller to a buyer for a profitable financial consideration.
3. What is an investment?
An investment is an action of allocating an asset (money or time) in the hope of a positive gain in the future.
You go back to college to upgrade your skills, hoping for a promotion and salary increase.
You buy stocks in the hope the prices will rise to make a profit.
According to Wikipedia.com; “To invest is to allocate money in the expectation of some benefit in the future.
4. What is real estate investment?
A real estate investment is any real property bought, held, and owned solely to generate a positive return (or a profit) in the future for the investor, you. The income could be because of selling the property, or it is market value appreciation, or both.
Real property is tangible, immovable, but transferable.
5. How does real estate investment work?
Real estate investing can work better for you if you devise an investment strategy. There are 3 key strategies in real estate investing. These are;
- Short term
When a selling deal is done quickly, we refer to it as a short-term investment strategy. Most beginners in real estate do short-term deals. Real estate brokers fall in this category because you don’t even have to put up your money to make the deal go through. You just need to facilitate the transaction between the seller and the buyers.
- Long term
When you have the capital to invest, you can be able to do long-term real estate investment deals. You buy, hold, maintain, manage, and sell down the line when the value of the property has increased reasonably. You could choose not to sell but generate income via a rental and value appreciation strategy.
- A blend of both
When you have the luxury of accumulated capital, you can combine both short- and long-term strategies. Most established real estate investors go for the blend strategy.
How does real estate investing work?
It works on the premise of positive cash flow. Your income has to exceed outgoing expenses in a reasonable (or respectable) margin. Thus, real property investing is a cash flow numbers game. If the cash flow numbers are positive, you are a lucky guy. Hence, everything you do in real estate is for profit.
Property Value must rise:
- The first assumption of real investment is that-the property must increase in value.
- The number 2 assumption-the cost for buying, holding, maintenance, and managing a real investment, must not exceed the increase in the property’s value.
6. Is real estate investment worth it?
Yes, it is a worth it.
Because there is a universal agreement amongst millionaires and billionaires that real property investing is the ultimate golden egg. It is a solid investment and rarely disappoints.
Real estate consistently increases in value and has no short-term fluctuations like the stock market. Even when the economy goes into a recession, real estate normally comes back to where it was before the recession.
- Investment security:
Investing in real estate allows you to protect yourself, your family, and your wealth.
- Wealth creation vehicle:
It is the industry that has produced the wealthiest individuals across the planet. Before the rise of ecommerce billionaires. When people make money, the first place they want to put their cash is in real estate. Anyone with excess money to spend after acquiring all the luxuries will end up in real estate investing.
7. Why real estate investment is good
It is a bankable asset. It is tangible, immovable and a solid source for pride, wealth and security. It earns you tax breaks. And you don’t have to pay rent because you own the roof over your head.
8. What are the types of real estate investment?
There are 2 types of real estate investments;
- Physical real estate investments
- Residential buildings
- Commercial properties
- Soft real estate investments
Real estate investment trusts offer a way to invest in real estate without having to buy, hold, sustain, or manage real property.
- Crowd funding
Real estate crowd funding-investors pool their money to buy real property. Investors work with real estate crowdfunding platforms such as ArborCrowd, RealCrowd, GroundFloor, CrowdStreet. Crowd Funding platforms open for international investors are;
Through a crowd funding platform, you can either borrow to invest, or invest cash for lending.
- Hard money lending
You lend money to real estate investors who cannot qualify for a mortgage in your operational base or location.
9. What are the benefits of real estate investment?
It is a steady source of income because housing is ever in demand. And it is a source of income available to you for the long term.
Here are the benefits of investing in real property:
- Positive cash flow
Ninety-nine percent of the time, income from property investments is normally in the positive territory. The good thing about real estate income is it grows. And it is a guaranteed income for many years to come.
- Tax benefit
Real estate investors enjoy tax breaks for owning rental properties. Tax break include;
- Zero self-employment tax
- Lower tax rates for long-term investments
- Zero VAT
- Tax break for property depreciation
The bottom line is, you save a lot of money with tax breaks.
- Mortgage paid for you
Yes, your tenants pay your mortgage via rent.
- Best strategy to create wealth
The income from real estate can be used to purchase more real property. The more property you own, the more income is generated. Thus, you end up building substantial wealth over the years.
- Loan security
A property title deed can borrow money from the bank. Loans help grow investment projects. With loan capital you could buy more real estate.
- Hedge against inflation
When inflation goes up, your rental income and property value goes up too. This helps hedge your income from inflation. Hence, real estate investors love inflation because it increases their net worth.
Getting into real estate investing has never been easier. Through a free registration, you could begin your property investment journey through a real estate crowdfunding platform. The beauty of a crowdfunding platform is that you can borrow and also invest in lending to peers. Either way, you will be in the real estate investment game. Real estate is a wonderful investment.
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