Real estate investment is a quick and easy way to multiply your money. Is it really that simple? John Sobrato started selling houses in College as a side-job. Now he is worth $4.3 bil. That’s how powerful real estate investing can be. It’s one of the most popular methods that wealthy people use to multiply their capital (i.e. money).For making money on the side, there are few better markets. You don’t have the need for constant research or heavy time investment like with stocks.
This article is written by our expert friends over at Lukinski Realtor
Making Profit from Poolside
Real estate investment… The name alone is intimidating and hard to grasp, so we break it down. Real estate is just a name for a piece of land with buildings or other improvements (e.g. a dock or fence), and things like rivers or lakes on the property. Investment is also just a fancy term for using your money to buy something, with the goal of making money. Now putting it together, real estate investment is buying real estate, and in turn making profit off this purchase. In real estate, investment means for example, buying a house to sell it at a higher price later on. There’s many other was to make money with real estate though.
- Real estate investment is buying real estate, and in turn making profit off this purchase
Millionaire Lifestyle – Luxury par Excellence
One of the most attractive parts of the real estate market is the luxury which goes hand in hand with the job. If you own three properties valued at $2 mil. each, you won’t be living in a one-bedroom apartment anymore. From New York to San Francisco, and Los Angeles to London, no doubt there will be properties everywhere that you can stay at. You’ll have connections to the rich and famous, and friends with villas and penthouse all across the world. Just take a look at a property being sold by a real estate mogul. This could be you…
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$38 Million Miami Penthouse? Yes Please!
If the massive apartment, slick interior design and swimming pool aren’t enough for you, maybe the interior design by Fendi and Bentley will be. Or maybe you’ll be pulled in by the fact that with purchase of the penthouse, there is a Rolls-Royce and Lamborghini included. This is the life of real estate investors.
Is it Really the High Life?
Does this sound too good to be true? It may sound like it, but it’s all true. If there’s one sure-fire way to become a millionaire it’s through real estate. Some 90% of millionaires have become so wealthy with real estate. Why is real estate so good for making money? Because everyone needs it, because unlike stocks, it’s a tangible good, and because every year, average real estate prices increase by 3%. Real estate millionaires are many, and there’s also many real estate billionaires
- Real estate moguls make up 90% of millionaires
Real Estate Billionaires – Only in the U.S.?
The American dream, from dishwasher to multi-millionaire. That may seem like a myth, but it seems when you’re looking at real estate billionaire’s that may be the case, with many coming from the U.S. Unsurprisingly, considering the massive population of Asia, this continent is heavily represented. The country with the most real estate billionaires is China. Still, the U.S. has most real estate billionaires in the world, with 44. Wondering about Trump? He’s not even in the top 20 with an estimated $4.5 bil. Below a list of the richest real estate investors in the world
- Wang Jianlin (China) – $28.7 bil.
- Lee Shau Kee (Hong Kong) – $21.5 bil.
- Michael Otto (Germany) – $15.4 bil.
- Donald Bren (USA) – $15.1 bil.
- Simon & David Reuben (UK) – $14.4 bil.
- Joseph Lau (Hong Kong) – $13.1 bil.
- Gerald Cavendish Grosvenor (UK) – $13.0 bil.
- Thomas and Raymond Kwok (Hong Kong) – $13.0 bil.
- Stephen Ross (USA) – $12.0 bil.
- Robert Kuok (Malaysia) – $10.0 bil.
So… Why Real Estate?
Investing in real estate means fairly low risk, and the chance for massive reward. That’s what makes it so attractive for so many investors. The reason you stand to make so much so quickly, is because of leverage. Without getting too technical: by taking up debts (debts which you will soon pay back), you can make profit off of a $500.000 property. Despite not investing more than $100.000. With other investment options, if you invest $100.000, you’re only making profit off those $100.000. Another big advantage is related to taxes. Compared to other types of income, you pay proportionately less income when you’re making it with real estate investments.
- Leverage gives you more profit with less investment
- Pay less taxes than you would otherwise
Speaking of taxes. In the real estate world you pay three types of taxes when buying a house, with one other tax having to be paid regularly when you own real estate. Want to learn more? Lukinski’s easy-to-understand guide is made for everyone:
Getting Rich: Start Here!
The benefits of real estate investments go beyond the here and now. You will profit from your actions this year for the rest of your life. So you want to get into the business. Where do you start? You don’t become a real estate mogul overnight… Probably. There’s a pretty simple method to get into real estate investment with the help of banks and mortgage companies. Taking on debt may seem like a very bad idea if you’re not familiar with the real estate market, but it’s quite common, and according to many real estate moguls, it is even desired. This is an easy method to make money:
- Save up for a Downpayment
- Buy Property
- Sell/Rent Property
- Use Profit for New Downpayment
New Car or Luxury for Life?
For real estate, you’re gonna have to save up – Unless you have enough money to pay for a down payment (in which case, skip to step 2). What’s a down payment? A down payment is when you only pay a proportion of the price of the property right away, a bank (or mortgage company, etc.) pays the rest, and in return you pay the bank a certain amount every month until you’ve paid the full price. The down payment should be at least 20% of the total price of the property, otherwise you’ll have to pay extra fees like mortgage insurance and high interest rates.
- Down Payment at least 20%
Typically, saving up for a down payment seems more daunting a task than it actually is. If you can save $2.000 a month, and the property you want to buy is worth $60.000, you only need to save 6 months to pay your 20% downpayment. Once you’ve paid your downpayment, you can go on to step 2,
The Exciting Part – Shopping
Step 2: Buying the property. Here you find the villa, apartment, or whatever you want, and buy the property. Make sure to do your research and buy smart! Again, unless you have a lot of leftover money, you’ll want to only pay a down payment. You’ll probably have to hire someone to do some renovations, but after that you can be the proud owner of a property.
Do your research, and buy smart!
This is where the risk has begun, and you can’t back out anymore. But don’t worry, because you’ll be getting money back ASAP, in step 3…
Profit Profit Profit!
Now is the best part. Sit back, relax, and reap the benefits of your clever investing. How you profit depends on what you want to do. There are a few methods to choose, either you rent out the property, receiving monthly rental payments from your tenants, or you sell it right away, and have the money back in your pocket in no time.
You’re Rich, Now What?
Step 4, you’ve made a lot of money, now what? Well you can go on vacation to Florida, and hang out until you’re bored of drinking mojitos by the infinity pool. Or you can use the money you made to pay for a new down payment. Now we’re back at step 2, buying a new property.
If you’re still renting out the first property, you will double the amount of properties you’re receiving rent from, and suddenly be making twice as much money. If you sold the first property, you can buy an even bigger property this time, sell it for even more, and go home with even more profit.
The Big Question – How??
So you’ve decided you want to make money with real estate investment. No doubt a good decision. Still, you have some decisions to make. The first of these is, how is your investment going to look? There’s a few options, from the classic renting out property, the new age REITs, or maybe you want to become a house flipper. Below we go through everything you need to know about the main types of real estate investments.
Renting – The Classic Method
Probably the most popular method to make money with real estate, is with rentals. That means buying a house, apartment, condo, etc. and letting people live there. These people pay you every month. Your residents are happy they have a place to live, you get paid a nice sum every month, and everybody’s happy. You’re probably thinking, well it’s not that easy, who takes care of the tenants? What if something is broken? You have a property manager for that, and while you have to do some of these tasks in the beginning, as soon as you’re making enough profit, it’s time to use that profit to pay for your property manager.
- A property manager does repairs and fixes small issues
#1 Must-Know Tip
The experts swear by the 1% rule. As with everything in real estate, numbers make the magic. The 1% rule is quite simple, and it tells you if your investment is worth it. A good investment allows you to take in 1% of the amount that you spent on the property. For example, you buy an apartment for $200.000, spend $20.000 to have someone renovate it, then you have spent $220.000. 1% of $220.000 is $2.200, meaning that if you don’t receive $2.200 a month in rent, your property is not a good investment. It’s that simple.
- 1% Rule = Good Investment
REIT’s – Profit off Someone Else’s Investment
What is a REIT? A REIT is a real estate investment trust. In layman’s terms: an organization or company which basically takes your place as investor. This company owns real estate, manages it, and then finally, creates income with this real estate. Your place, when investing in REITs is to pay a certain amount to this company, providing them capital to invest. If this sounds a lot like stocks to you, you’re understanding it perfectly well.
Like Stocks with Real Estate!
These REITs are mostly attractive for those not looking for quick profit, but rather a safe investment where their money is sure to not lose worth. It is a stable source of low-income, unless you invest very heavily. A lot of this profit is also not fully taxed, meaning more money lands in your pocket than it seems.
Big Cash, Quick Cash – Flipping
The quick and dirty. You don’t want to spend years and years seeing out the profit of your investment, with the returns coming in slow and steady? You can start flipping houses. Flipping houses entails buying real estate, renovating it, and selling it again. The real estate will usually be in need of renovation, and ideally undervalued. After buying, you renovate for low costs, and make it an attractive investment for future buyers. Finally you sell it again, making more money than you spent on acquisition (buying and renovation price). Tips here, buy undervalued, and make your renovations lead to an overvalued property
Tip: Buy Undervalued!
The Future – Crowdfunding
No doubt a risky business, this is the new age of real estate investment. With crowdfunding on real estate investments you join many other investors who all pay a little bit towards a big sum. Take for example your average joe, who’s making more money than he is expending, but does not yet have a million dollars on hand to pay for real estate. He can go on one of the many real estate crowdfunding platforms, and be one of many individuals who pay towards a piece of real estate.
The downside: You can’t sell your investment quite so quickly, and can expect to have your money tied up for years. Yet, unlike REITs which are tied to the stock market and vulerable to its fluctations, crowdfunding is quite independent. Additionally, you will see returns of around 14%. That means a $100.000 investment today would be a comfortable bonus of $14.000 in a few years.
- Returns around 14%
Side-Gig as Step 1!
Lastly, the option for the non-committer is owning a vacation rental. This is a property that you personally also live in, whether it’s permanently or for only short periods of time. Think AirBnB. You own an apartment, and have an extra room left over. You buy a bed, desk and some decoration, and put it on an online platform. Then, for a few days a week, someone stays in the extra room, paying you money for a room that would otherwise have been empty. The gateway to drug for real estate investors.
The First Step in a Real Estate Mogul Career
Tips from a Real Estate Billionaire
This is Roger Wang, a self-made billionaire. He shares his secrets to success from his story of becoming the real estate tycoon he is today, to the golden formula for becoming this rich with real estate. Always learn from the best!
Checklist – Become Rich with Real Estate
So, what should you take away from this? What are the most important things to know to become a real estate millionaire? These are the take-aways from us.
- Real estate is the number 1 way to get rich
- Save up, buy property, invest your profit, repeat
- Make your choice! Do you want to invest with rental, flipping, REIT, or Crowdfunding?
- Learn from the Best!
Big Money and a Memorable Life
As explained, investing in real estate is simpler than it sounds. If all you’ve ever heard was mortgage this, depreciation that, and you never had an idea what to do or where to start, hopefully we’ve helped you now to get a first insight. It’s important to emphasize, this is a market with a lot of money. Everyone needs real estate, and most people have real estate. It’s a massive market, and you can easily get into it. Even if it’s just small REIT investments making you small money in the long run. If you have money over, or want to invest smartly, real estate is the way to go.
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