Billionaire Andrew Carnegie once famously asserted that “ninety percent of all millionaires become so through owning real estate.” Is that still true today? Is real estate a smart investment?
In general, financial and investment experts agree that real estate is a great investment option for building long-term wealth. It’s not for everyone, however, so before you invest your hard-earned money, make sure you know whether it’s a good investment for you.
To help you weigh the pros and cons, here are three types of real estate investments and what you need to know about each.
Rental Property Real Estate Investment
First, it’s important to know the risks you are getting into when going into rental properties. If the house remains empty, you lose monthly income; if a major repair is needed, you have to cover the costs; and you are responsible for all ongoing maintenance needs.
Also, despite your best due diligence in vetting potential renters, you could end up with difficult tenants who end up costing you more money than they’re worth.
Despite the risks, however, rental properties have the potential to be enormously lucrative. The value of your property will appreciate while your renters cover month-to-month costs, creating a growing stream of passive income over time as your rent income increases and your mortgage gets paid down.
If you’ve considered becoming a landlord, now is a great time! Interest rates are low, enabling you to purchase rental properties at a low cost. If you are looking to invest in rental properties, I’d love to chat with you about the hidden gem neighborhoods that are prime investment areas! You can also customize the search and buying process through my Concierge Realtor services.
Investing in a Second Home
If you’re not interested in the commitment of long-term rentals, you might consider investing in a second home. Of course, one of the advantages to this approach is that it provides a nice vacation home for you to enjoy whenever you please. (Wouldn’t that have been a nice escape while we were all stuck at home!) But you can also earn potential income by renting it out when you aren’t using it, such as on the Airbnb or Vrbo market. Vacation homes can become especially lucrative in highly sought-after destination locations, as they appreciate more quickly and fetch a higher rental fee.
Of course, no investment brings reward without risk, and there are drawbacks to this strategy, as well. While tenants of long-term rental properties often pay many of their upkeep and utility costs, short-term renters will expect you to shoulder those expenses. In addition, success in this short-term rental market is often much more gradual, as reviews trickle in and word-of-mouth spreads. Just make sure to check with the neighborhood HOA and ensure the property is up to code. Some neighborhoods and condo buildings are very strict regarding short term rentals.
Your Own Home’s Investment
Last but not least, don’t overlook the real estate investment potential of your own home! As you search for your dream home in 2021, know that while it will certainly be a place to put down roots and live a life you love, it can also be a smart financial investment.
Done wisely, owning a home is one of the best ways to accumulate wealth as you age. As you pay off your mortgage and as your home value appreciates over time, you will build equity and amass financial resources for your future.
In order to find the right investment, however, you’ll want to keep a few things in mind as you search. Remember that location matters and that school districts, neighborhood HOAs, and community involvement all impact the personal and financial potential of your home. Hiring a good realtor is the key to success when finding your dream home that is also a smart investment.
Experts still generally agree that real estate investment is a smart path for building long-term wealth, as long as you enter carefully and knowledgeably. But don’t carry that burden yourself! Make sure you hire a realtor who will help you make the right real estate investment for YOU.
I’d love to partner with you to make your real estate investment dreams a reality. You can find my contact information below, or you can send me a message here on LinkedIn. I can’t wait to hear from you!