Getting Wealthy From Real Estate Investing

Do any online search for real estate investing – or on how to get wealthy in any way – and chances are you’ll get a ton of sites that promise to tell you how to “get rich quick” through real estate investing.

Yes, many of these sites are simply gateways to sell you a book or DVD collection or some other product and very rarely do they offer a real and legitimate answer to your inquiry of building wealth through real estate. But does this mean that all methods of real estate investments are borderline scams?

Obviously not. Probably everyone knows that there are many people, some even very famous (no doubt Donald Trump comes to mind), who not only do well but who became exceedingly wealthy through real estate investment and development.

So how do you go about making a living and even gaining wealth through real estate? Consider the following information.

Think long-term.

Historically, real estate has doubled in value every 11 years (6% per year on average over the period). Obviously this is not a hard and fast rule, as some areas have seen property decreases while other areas have had double or triple that rate. However, this is a good average and can be typically planned on when considering a home or other real estate as an investment. Making payments on private homes, for example, can increase its value as the debt against it is decreased. This is why many consider their homes as part of their retirement “nest egg.”

Unless you’re a real estate developer looking to complete a particular project for the express purpose of selling at a certain time, thinking of real estate as a long-term investment is typically best.

Flipping can be dangerous – or profitable.

The time it takes for personal real estate to increase in value is one of the reasons that real estate flipping is so dangerous. “Flipping” of course refers to the purchase of a property with the express purpose of reselling it, usually as quickly as possible, although sometimes it is after certain upgrades or remodels are made.

Many people are seduced into the practice of flipping by the promise of instant and profitable cash. Some so-called flippers even boast of making thousands of dollars within hours, or just long enough to process paperwork, when in reality these types of deals are few and far between.

Sometimes there is money to be made in flipping, if there are improvements made to the property before it is resold. For a property valued at $100,000, the purchase price may be 10-50% less due to foreclosure or abandonment. A flipper may put $10,000 in improvements into the property, and then sell it for the original or even a higher value.

So, a foreclosed home that’s been valued at $100,000 may sell at a foreclosure auction for $70,000. A flipper purchases the property and puts $10,000 in upgrades and repairs into the property, and perhaps pays another $5,000 in closing and other costs, bringing their total payment for the property to $85,000. But because of their improvements, they are able to sell the house for $115,000, bringing their profit to $30,000.

Many who actually get wealthy from property flipping are those who continue to invest their profits in more and more property flipping, specifically those homes and investments that are considered high-end, which will bring in the highest price.

Obviously someone who expects to make money from real estate flipping needs to do some homework beforehand. Just putting some money into upgrades or remodeling doesn’t guarantee a home or other property will sell, and it’s good to know what changes should be made in order to regain the most investment.

Cash flow properties provide income – but not much.

Cash flow properties are those with some monthly income, that is, the difference between what is paid in and what is paid out. Traditionally, these are ‘rental’ properties, and bring in a constant flow of cash for the investor.

Sadly, many investors use this cash for their living expenses and never grow the wealth they could by simply reinvesting this money into another property.

Cash flow properties are one of the absolute worst for growing real estate wealth, unless of course an investor is dealing with high-end properties. Renting out a home or two or owning a small apartment building is usually not going to generate enough income to in turn invest in other properties, especially considering the cost of maintenance, property taxes, vacancy rate, and the like. Investing in high-end properties is somewhat different, as the cash generated by upscale apartments or offices is usually enough to not just offset the costs but provides enough to also invest in an additional property.

Taking advantage of market downturns.

In areas where home foreclosures are high, real estate investors know to take advantage of this situation by snapping up properties very cheaply in order to upgrade and then rent or lease these properties.

The same can be said for tax lien properties, which are usually a safer option than foreclosed properties. It takes some homework to know why foreclosure rates are high in any particular area – if the economy is in a consistent downward spiral, what guarantee is there that you will find renters or other purchasers? Tax liens are usually significant of only one particular property owner and not that of an entire area.

The real beauty of real estate investing is that the business is typically somewhat sound, even in a market downturn. Real estate, despite the fluctuating markets and mortgage ups and downs, is typically one of the securest investments anyone can make.

Doing your homework.

The bottom line is that there is wealth to be made in real estate, and oftentimes, there is a tremendous amount of wealth. Obviously it doesn’t come easily, but learning how to play the market of real estate investment and growth can be very lucrative.

Research is needed to decide if any particular parcel or demographic is sound and solid, and of course decisions should be made based on this research, not gut feelings or sentiment. And if you play this game right, tremendous wealth can result.

Contents

• How Much Mortgage Can You Afford?
• Buying a Good Vacation Home
• Buying a Home for Resale Purposes
• Claremont is the Top Earner – and Most Expensive
• Commercial Real Estate Still a Safe Bet
• Determining Your Offer Price
• Empty Homes for Sale
• Exercise Caution When Flipping
• Expensive and Alternative Homes
• Figuring Property Taxes for the High-End Real Estate
• Florida’s High-End Real Estate Goes Limp
• Foreign Investors and the Hamptons
• German Investment in U.S. Real Estate Creates a Bidding War
• Getting Wealthy From Real Estate Investing
• Going Green
• High-End Goes High-Tech
• High-End Investors – Why Immune to the Real Estate Crunch?
• High-End Real Estate Feels the Crunch?

• High End Property Site Map