The real estate market in San Diego has been in a tailspin in certain areas for the last few years and fair weather investors are starting to worry about how they will be able to make money now that their houses are not appreciating. It is important to remember that the key to building true wealth in real estate is through buying and holding. If all you want to do in real estate is make easy money, then you need a primer on how to make really good money in real estate.
The authors of Investing In Real Estate, Andrew McLean and Gary Elred have provided that primer, listing eight ways to grow your wealth in investment real estate.
POSTIVE CASH FLOW. This is simply what it sounds like…. the rent covers the costs of owning the home and you have money left over at the end of the month.
EQUITY GROWTH VIA AMORTIZATION. As the mortgage shrinks from the mortgage payments, your equity grows (and so does your net worth). This is one of the most powerful means of wealth growth… using OPM (other people’s money) to building your net worth.
WHOLESALE PURCHASES. Of course, the most effective way to build net worth and equity is to buy a house for a bargain price. These properties would be the pre-foreclosure, short sale, foreclosure, REO’s (real estate owned by a bank), tax sales, etc., where the investor buys the property well below market price.
LOWERING TAX BILLS. One of the greatest benefits about real estate investing is all the tax breaks allowed for these type of investments that cuts the investor’s tax bill, thus increasing the bottom line and equity growth
SMART ASSET MANAGEMENT. Many novice or inexperienced real estate investors lose money simply by not managing the asset wisely. For instance, painting properties before the wood is actually peeking through will keep the asset in good shape, seal the wood and protect it from more expensive damage.
RENT APPRECIATION. As the cost of living increases, so, too, should your rent cash flow. Keep up with the rental market prices to increase your net worth.
All of the above factor into what your rate of return will be on each real estate investment property you own. They are key to building your wealth through real estate!
