Looking for extra sources of income? Forget about affiliate marketing and generating peanuts in profits. Instead, consider saving your money and investing in real estate. More people are choosing to rent rather than buy their homes, making today a great time to own a rental property.
There is a learning curve involved, but the payouts are significant. Just a few rental properties can provide you with passive income throughout your retirement.
If you need further convincing, check out these 6 facts.
1. You can invest in real estate with $5,000 or less
Ideally, you’d want about $25,000 available to make your first real estate investment. However, that’s not necessary. If a lack of cash has been preventing you from pursuing real estate investing, this is good news.
Although it’s possible to work with such a small budget, you’ll need to get creative. Houston property management experts at Green Residential recommend five ways to invest in real estate with $5,000 or less:
- Real estate crowd funding. When crowd funding your first real estate purchase, you’ll be spreading the investment among multiple people, which means less profit for you. However, it’s a great way to get your feet wet and build up a larger amount of money you can invest in another property.
- Real estate investment trusts (REITs). A real estate investment trust is an investment in securities that are invested directly in real estate through properties or mortgage investment.
- Wholesaling. This strategy won’t make you a lot of money at once, but when done consistently, you’ll generate a steady flow of income. With wholesaling, you find someone who wants to sell their home and create a contract with the seller to buy their home. Then you market the home and reassign the contract to another buyer. You make money by charging a fee to reassign the contract.
- Joint venture purchases. Similar to crowd funding, a joint venture purchase involves two or more investors and a bank loan. Each person provides what they can toward the down payment and a bank loan covers the rest. The amount of ownership each investor has in the property is calculated based on the amount of money they contributed to the down payment.
- Purchasing rental properties. In some areas, it’s possible to buy a cheap rental property and make a down payment of between $2,500-$5,000.
2. Real estate investments appreciate
Unlike your car, the value of a home appreciates over time and keeps up with inflation. If you decide to sell a rental property in ten or fifteen years, it will probably sell for more money than you originally paid. Likewise, continuing to rent a property will bring in more rent over time as you increase the rent periodically.
3. Real estate investments provide predictable cash flow
Nearly every cost you’ll incur while investing in real estate is predictable from your monthly mortgage to repairs, maintenance, and marketing expenses. The income you collect from a rental property is also predictable. Since both expenses and income are predictable, you’ll know exactly how much money you can expect to earn from each of your properties.
4. Investing now will provide you with security when you retire
Assuming you haven’t already retired, investing in real estate will give you cash flow when you retire. Your cash flow won’t be huge in the beginning, but as time goes by the mortgage will be paid down and your cash flow will increase.
When you retire, you’ll either have a steady stream of income or a place to live – whichever you need most.
5. Real estate investments are tax deductible
The tax code is exceptionally favorable to property owners. You can deduct all kinds of property-related expenses when you own real estate. For example, maintenance, repairs, improvements, property upkeep, and even the interest you pay can be deducted in most cases.
6. Real estate investments are less volatile than the stock market
The risk involved in real estate is fairly predictable. For instance, when the market improves, the value of your home goes up and you build more equity. Over long periods of time, this adds up. With the stock market, the risk is volatile and there are many factors you can’t control.
Real estate isn’t fast money, but it’s reliable
“Good things are worth waiting for” is a healthy mindset to have with your first real estate investment. You won’t generate massive cash flow on day one or even after a year, but if you stick with it and allow your investment to bloom, you’ll see effortless returns when you need it the most.