29/09/2020
There are many ways to turn a profit with real estate.
When you buy a stock, the only way you can make money is if the stock appreciates in value, and you sell it at the good time. With real estate you can make money in many ways, I can name those 6 off the top of my head, and there are many more.
1. Rental income. That one is the main source of profit investors are going for when buying a rental, and doesnβt need an explanation.
2. Buying low. You turn an instant profit if you manage to buy a property for under market value. Think foreclosures, quick sales, and awesome negotiation skills.
3. Selling high. You can make extra money if you stage the property to attract buyers over market value. With stocks, you always buy and sell at market value. With real estate, you can try to beat the market.
4. Renting smaller units. My friend rent three rooms by the room, to three tenants. He can charge more than if one family was renting the whole place. You can divide your family house into a duplex or a triplex and increase the rent.
5. Renting to businesses. Businesses are a different type of tenure and rents are generally higher. They are also safer if you choose a well known business to rent to.
6. Tax benefits on improvements. You can also deduce the cost of the improvements from the rental income, while the added value to the property is yours to keep.
How you profit from real estate depends on YOU. When you buy a stock, you never know, for as much as you study the company, if its CEO isnβt about to leave and the next one will run the company to the ground, if there is a merger with a less profitable company in the pipeline, or if an earthquake will destroy the production plant in China. Your real estate investment will be a result of your own efforts to renovate a place, promote it, screen a proper tenant, and keep it up over the years. And real estate is tangible. When all the markets tank, you are trying to hold to your losing positions in hopes they will go up in a few months, or hurrying to sell at a loss before it gets worse. Real estate will bring you a monthly rent to cover the mortgage, even if you have negative equity. And in periods of economic turmoil, when people lose their houses to foreclosure or first time buyers are denied mortgages by the banks, you will have more potential renters than ever. When things go back to normal, home prices will increase and you can make a nice exit, sit it out until the next crisis, and go back in the game to buy low. Donβt want to time the market? Just buy. Now is as good a time as any, for all the reasons mentioned above.
