If you’re interested in establishing a second line of revenue, or if you want to cultivate wealth, one of the most attractive and accessible options is property investing—the art of growing wealth by purchasing and managing different properties. If you can find good deals on properties in your area, you can rent the property for recurring cash flow, flip the house for an immediate profit, and/or sell the house after a period of growth.
If you’re new to the world of property investing, this can all be very intimidating, but with the right teachers and enough experience, anyone can be successful in this field.
Setting Your Goals
First, you need to understand why you want to be involved in the world of property investing, as your motivation is going to shape your strategy. For example, are you trying to turn this into a full-time career? If so, you’ll need to optimize your strategy for a large scale, and manage a portfolio that keeps you busy. Are you trying to generate more revenue on an ongoing basis? If so, a small number of low-maintenance rental properties may be your best option. Are you using property investing as a path to retirement? If so, you’ll need to optimize your approach for long-term growth.
Choosing a Path to Profitability
All property investors are interested in making money, one way or another. Some try to capitalize on multiple paths of profit concurrently, while others optimize for one path specifically. There are a few primary ways you can do this:
- Flipping houses. Flipping houses is the process of buying inexpensive homes (usually ones that need a bit of work), fixing them or improving them, then immediately turning them around for a profit. It’s a sexy-sounding strategy, but it’s much harder than it initially seems—and many prospective home-flippers end up failing. There are many challenges to contend with here, including finding the right deals, accurately estimating costs, and timing the sale appropriately. Accordingly, it’s a strategy best reserved for people who are experienced in the real estate industry.
- Collecting rent. Collecting rent is a common strategy, because it results in ongoing positive cash flow—and isn’t exceptionally difficult to pull off. You’ll still need to be selective about which properties you buy, but you can generally count on collecting rent in excess of your monthly expenses for as long as the property is occupied. And if you choose a simple property, like a single-family home, you won’t have many responsibilities to manage on an ongoing basis.
- Capitalizing on growth. Another approach is to purchase an inexpensive property in a neighborhood primed for growth; if property prices are consistently rising, with new amenities due for the neighborhood in the coming years, it may be in your best interest to make a long-term play. You can also optimize for this direction while simultaneously collecting rent to offset your expenses.
Finding Your First Property
Everything starts when you find your first property. Your choice will be a major determining factor in whether or not you’re successful. No matter what, you’ll need to find a property at a good price, and in a good neighborhood. If you’re optimizing for rent, you’ll need to pick a property that’s attractive to prospective tenants. This can be difficult, especially for an amateur, so consider working with a real estate agent or other property investors to find deals that aren’t publicly advertised. Even more importantly, be patient; it will be tempting to jump on the first deal you find, but it’s usually much better to wait for the perfect opportunity.
Consult With Experts
The best way to become a better property investor is with practice and experience; over time, you’ll learn from your mistakes and find ways to score better deals. In the meantime, the best way to improve your skillset and gain access to more resources is by talking to experts in the industry. Go out of your way to meet with real estate agents, property investors, house flippers, and other experts who have already made mistakes and gained experience. Learn from what they have to teach, and don’t be afraid to consult with them on questions and concerns as you grow—assuming they’re willing to share their knowledge.
Property investing isn’t the right strategy for everyone, nor is it a guaranteed path to building wealth, but if you put in the time and effort, you should be able to generate positive cash flow—and possibly set yourself up for a bright financial future. There are countless resources available to help you on your journey, from online blogs to mentors you’ll meet along the way, so as long as you’re open to new information, there will always be more to learn.