Real estate investments got a massive black eye in recent years. Conventional wisdom says that buying real estate is a bum deal because the price goes down. Sure, the value of real estate across the US and many other countries did go down. However, just like with any other market, the market recovered. It takes time but there will be a recovery.
Unlike stocks and other investments, real estate is solid. If you were to chart it through decades, real estate values continue to go up and up. Why? People will always need a place to live or do business in. Period. It doesn’t get any simpler than that. Also, the population tends to increase with time and there is only a fixed supply of real estate available. Fixed supply plus growing demand equals profit. This is what you need to focus on when you are considering going into real estate.
The best news is that real estate is the best way to set up a passive income stream. Here are some tips on how to do it.
Buy rental property
Scope out the rents in a certain district and buy properties in that district. You don’t have to pay cash. You can take out a loan. Just make sure the rental income, after factoring in vacancies and repair and maintenance costs, mortgage costs, and taxes, are high enough to be self-liquidating. Self-liquidating? The property pays for itself.
After a couple of years, your rental property would have accumulated some equity value. Borrow against this value to buy another rental property Keep buying properties based on their accumulated values while making sure they make enough rent to cover costs and generate a profit.
Pool profits to buy even more
After series of buying, borrowing, and pooling profits, you should have enough cash to buy even more properties. The name of the game here is to create a system of volume and scale. You need to have enough properties that generate so much income that you not only cover your costs, you have enough cash every quarter to buy even more properties. With the right planning, you can buy a huge amount of properties to achieve a huge scale income.
Get professionals to help you
Once you have more than a handful of rental commercial and residential properties, you might need to hire a maintenance company on a full time basis, or you might need to set up a property management arm. Whatever direction you take, you need to do it quickly, and you need to do it right. You don’t want to become a slumlord.