Building Wealth by Investing in Real Estate
There are more ways than one can count to accumulate riches. But one of the most typical methods to accomplish so throughout the history of our nation has been through wise (and occasionally fortunate) real estate investments.
Any investment should aim to provide a return that is as high as possible.
The unique potential of commercial and investment real estate to generate a return in three different ways is one of the attractions that draw so many investors to it.
These three distinct kinds of return on investment include cash flow and principal paydown and
appreciation
CASH FLOW
The cash flow generated by a business investment property asset is one of its key advantages.
The entire amount of rent that the tenant or tenants that inhabit the property collect are what creates cash flow in investment real estate. Investors seek out chances where the revenue exceeds all expenses associated with maintaining the property, such as mortgage payments, property taxes, insurance, repairs, upkeep, and so on.
The cash flow advantage to the investor is any revenue that remains after these carrying costs have been covered.
By raising rents as high as the market will tolerate and minimizing carrying expenses, the investor hopes to optimize cash flow as much as feasible.
PRINCIPAL PAYDOWN
Owning commercial and investment real estate has many advantages, one of which is the opportunity to borrow money to pay for a piece, usually a significant amount, of the property.
Investors can make use of the strength of leverage in this way. Each monthly payment will be divided between principal repayment and interest if the asset you invest in is financed.
The main balance on your loan is reduced in part by using the income from the rent payments made by the property’s tenants to pay down this loan.
To put it another way, your tenant’s rent payments are financing the addition of equity to your investment!
PROPERTY APPRECIATION
Real estate values “always go up, never down” or a phrase to that effect is undoubtedly something you’ve heard.
This is undoubtedly not the case, as millions of people can attest from recent experience in the wake of the 2008 global market crash.
But that doesn’t negate the fact that historically, property values have generally increased. We do know that home prices have generally increased by around 3% annually over the past 100+ years, despite some periods of much higher fluctuation, even though there isn’t a lot of reliable data to give a general historical appreciation figure for real estate like there is for other investment types like stocks and bonds.
It’s probably safe to conclude that this number is somewhat comparable to the real estate market overall for the same period.
Real estate investing is no different from other types of investments in that investors constantly try to time the market by purchasing at a point when the property will increase in value over time.
Investors who have been successful at timing the market on this generally generate arbitrage profits from their real estate investments and accumulate significant wealth.
CONCLUSION
Building your wealth is important. This is very much attainable because of the high returns on investment from real estate investments.
You can increase your cash flow, use rents to pay down the principal while increasing the equity in your investment, or just let the value of your property rise to accumulate your wealth.
There are several properties on REZO that can help you with this. anything in between, from retail to multi-family, warehouse, and everything in between. We’re here to support you. To discover more, get in touch with us.