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5 Ways to Make Money in Real Estate

Real estate investing is the most powerful wealth-building tool available to the average person.

The reason it’s so powerful is: there are five ways it makes you money.

Stocks, by contrast, only share one of these sources (two if you’re getting dividends).

Once you understand how all five of these income sources work, you will begin to see the tremendous wealth-building power of real estate bought and managed correctly. Read More

Do Real Estate Investors Make Money From Their Investments?

Investing money and achieving greater financial freedom and independence is something that many people dream of all over the world, but for too many people the dream never becomes a reality. It is well known that real estate is one of the best and most lucrative investments available on the market, yet potential investors still find themselves asking: do investors make money with real estate?

The simple answer to this question is: yes. Real estate can provide an exceptional route towards greater wealth, security and freedom, and with the right advice and support, anyone with sufficient initial capital can turn real estate investments into great, long-term sources for creating wealth and building passive income.

Of course, knowing where to begin with any new financial endeavor can sometimes be the biggest hurdle. And if you are currently aware of the general benefits of real estate investment but simply do not know the particular avenues which can lead to investment success, there are a few key pieces of information to keep in mind.

How Can Investors Make Money in Real Estate?

The first and most obvious way that investors make money from real estate is the simple fact that – at least in the United States – property values can generally be relied upon to increase as the years go by. This process, which is known as ‘appreciation’, means that the wealth of a person investing capital whose capital is invested in real estate is likely to grow (on average at a rate of around 3% per year) without their needing to do anything at all, simply due to the way that the property market operates.

When investors want to speed up the process, they can ‘force’ the appreciation of property values by conducting maintenance and rehab work which improves the desirability of the property for potential buyers. If you buy a property that is currently fairly run-down and you invest your own time and labor into improving it, you can significantly grow your wealth in a relatively short period of time.

Another option that is particularly relevant to those seeking to create wealth and passive income from their investments is taking advantage of the rental market. There are always people and families looking for somewhere new to live, and if you own a desirable property, you can rent it out to the right residents and enjoy a passive monthly income.

The process is not without effort on your part, as you will need to make sure your property is in good condition, find the right residents and take responsibility for general maintenance and upkeep to keep your residents happy. As long as you can do all these things you can make a great deal of money from a property which may otherwise have sat vacant.

Learn How Real Estate Makes You Money with Lifestyle Unlimited

Here at Lifestyles Unlimited, you will find a welcoming community of like-minded real estate investors who commit to helping each other achieve the best possible results in real estate investment. Book your free online real estate workshop today or attend our real estate seminar and you will be building your new property portfolio before you know it!

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I Said Correctly

Quick Disclaimer: These five income sources only apply to real estate bought and managed the way my mentors taught me:

A) with equity,
B) with cash flow,
C) in “bread and butter” neighborhoods,
and D) managed with best practices.

If your knee-jerk reaction is that real estate investing is too risky, you have not yet been taught how to minimize the risk. The way I was taught to invest in real estate is not the same way that many of the “gurus” teach. Most of those programs are far to risky for my taste.

Multiple Streams of Income

One neat thing about having so many different income streams is that real estate can be forgiving. Many people I know (including myself) screwed up on their first deal, but still made money. That’s because one income stream can make up for a lack of another.

Now, I don’t recommend screwing it up. You might as well do it right as long as you’re getting in the business. That way you won’t ruin your taste for the most powerful wealth-building tool available to the average person.

Let’s run down the list of the five ways:

1. Cash Flow

Cash flow is the reason we seek passive income-producing assets. Without cash flow, you don’t have income… meaning: you can’t quit your job without cash flow.

We don’t buy a piece of real estate unless the rental income is greater than the monthly expenses by a decent margin. For example, when your tenant pays you $1,000 a month and your monthly expenses including principal, interest, taxes, insurance, and maintenance/occupancy reserve are $800 a month; the $200 difference is now income in your pocket.

2. Equity Capture

Equity capture is when you buy an asset for less than it’s worth. In real estate, it’s when you buy a house in a $100k neighborhood for $50k, fix it up for $20k and you’re “all in” for $70k.

You just captured $30k in equity which goes directly towards your net worth. Few other investment vehicles can create wealth so quickly.

Without equity, you are exposing yourself to the risk of a falling market. We always buy assets with equity so that we are never hurt by a down market.

Online businesses, network marketing, and vending can be good sources of cash flow, but they don’t offer an opportunity to buy an asset for less than it’s worth.

3. Market Appreciation

Real estate doubles in value every twenty years. It might fluctuate in the short term, but it is forced to rise over the long term with inflation of building materials, labor, and scarcity of land.

The main reason most people buy stocks today is for market appreciation while it’s only the 4th most important reason we buy real estate. Do you see the difference?

While stock investors live and die by market appreciation, real estate investors see it as a nice bonus to pile on top of the other four ways we make money.

4. Principal Pay Down

Here’s a neat way we make money in real estate that most people don’t even think of. We naturally accumulate equity in our houses as the notes get paid down.

Even if you weren’t making money any other way, your tenants would be paying down your mortgage a little bit each month. It starts out small, like fifty or a hundred dollars a month, but it grows over time and adds to your equity in the house.

The other asset classes typically don’t have mortgages, so this wouldn’t apply.

5. Tax Advantage

Real estate investors pay the lowest taxes of any for-profit group in the United States. The IRS allows us to reduce our earned income tax on cash flow by taking a depreciation deduction against the house. We can avoid capital gains tax when we sell by using a 1031 tax exchange.

How long can you avoid taxes with a 1031? If you pass the property to your children, they will take over at the new cost basis, which wipes out all of the capital gains over the life of that asset.

None of the other assets can claim such a huge tax advantage.

Does it Make Sense?

Are you starting to understand why I talk up real estate investing so much? It’s the only asset class that I know of that can create rapid wealth. All the others make money in one or two ways, but not five.