How often do you hear phrases like “It’s time to get serious and invest in real estate.” Well, there’s a reason for it. When it comes to investments, this is the market where the money’s at, ultimately. And after what happened by the end of the 2000s, real estate is less likely to go south. Just compare it to cryptocurrency, and you’ll immediately see how the two differ (the latter being so unpredictable).
Nevertheless, there’s so much stigma and misconceptions about real estate. Many of us associate it with the big boys and old money. After all, we’re a generation troubled by student loans that’s having it much harder than our parents and other baby boomers did. Yet, in reality, real estate isn’t l rocket science. Anyone, let alone a 30-something, can step foot into this world and make a reasonable profit.
How Does the Real Estate Industry Work?
Before we can go any further, we need to clarify how real estate works. But don’t worry — we’ll keep things nice and simple. Namely, the value of real estate tends to rise. The result of this tendency is that people can buy and sell it to make a profit. This happens with the helping hand of real estate agents, who chime in on transactions and get their cut. If any of this seems confusing, we’ll try to simplify it even more.
In America, the whole process begins when a person files a contract to sell their home. They do it with a listing agent’s help, who publishes the home on the Multiple Listing Service. After it’s on the MLS, another agent will pop up and inquire about their client buying the home. The two parties share information, and then they negotiate the sale. They agree upon a price, solve legal issues, and finalize the sale with everyone happy.
Real Estates Have Lesser Risks Compared to Other Investments
We’re not here to look you in the eyes and straight-up lie how real estate is completely risk-free. Of course, it’s not. No market is. Things change, evolve, and problems happen. Nothing is certain nowadays. But if you compare it to stocks, bonds, certificate of deposit (CD), and even mutual funds, real estate is a much better option.
However, we can’t just say that and move on. We need to compare these investments to back our claims.
- If you put the real estate and stock markets next to each other, you’ll immediately realize that the former is much less volatile than the latter. In other words, stocks jump and fall constantly, while real estate moves more slowly.
- When it comes to bonds, they’re a safe bet, but there isn’t much money in them. The gains of selling or buying a real estate investment property are way higher.
- CDs are similar to bonds in many ways. They are safe bets, but they don’t offer much profit for you as an investor. You can, of course, manage your way through the market and make it big, but it takes very long to get to that point.
- Mutual funds really are long-term investments, yet their appreciation is nowhere near a guarantee. They’re easy to invest in, but that doesn’t make them any better. They can leave one empty-handed.
Real Estate’s Value Is Growing
Another reason to invest in real estate is that the market is on the up. Most experts believe that this year will continue the trend of people buying houses, which means that the prices will go up. In their eyes, the demand of first-time home buyers — people between the age of 25 and 35 — is what will keep the market on its feet. All this is good news if you’re looking to enter commercial real estate in the following 12 months.
Some Real Estates Are Cheaper
Finding your way in this business doesn’t have to stop in the United States. Moreover, Europe seems like a great place to start investing in real estate. Although the COVID-19 pandemic wasn’t something we’d like to happen again, it was a somewhat positive event for people with real estate investment trusts. In simple terms, it was behind many bargains around the world, and particularly — in Europe.
The Old continent is literally becoming old, which means undervalued assets. This means that you can come in with a strong U.S. dollar and buy places that have historic appeal for others, who’ll be looking to buy them off you. Such a place is Italy. Both urban houses and gorgeous countryside villas in all parts of the country are empty and practically begging for someone to come over and take them for cheap.
Real Estates Can Be Modified Into Income-Generating Investments
Another reason why you should consider entering the real estate market is that you can easily modify property so that it becomes income-generating. In other words, you can make money from renting, enjoying market price appreciation, or by additional revenue streams that add value.
So, let’s take a look at a couple of options that you have when you buy a real estate property, shall we?
- Your first and obvious choice is to rent properties to single families. This is one of the most common routes for young investors, as it’s inexpensive in all markets across the United States.
- On the other hand, you can work a small multifamily property. These include duplexes and other units that increase your cash flow due to more tenants.
- Another income-generating option is to head into turnkey properties. These are completely updated houses and apartments where the cash flow begins immediately since it’s based on escrow.
- There are also short-term rentals. These are seasonal and involve tenants who are on vacation. They might not generate money during the whole year, but when the season hits, well, you’ll be swimming deep in greens.
- Have you heard about fix-and-flip real estate? It’s when you buy a property, repair and renovate it, and then resell it at a higher price.
- There are also wholesaling, real estate investment trusts, and crowdfunding options to look up. All three can generate great income if you manage them properly, but we suggest starting with one of the above first.
Real Estate Can Be Bought and Sold at Any Moment
The best part about real estate is that you can buy or sell it fast. At any moment, you can flip it towards any side and still make a profit. This is because there will always be someone willing to do real estate work with you. From families looking to start their new life and funds looking to grow, to others who need to leave their home for any reason.
However, it’s not ideal to purchase or sell at any cost. At least, it’s not smart to allow the other party to see that you’re in a rush to do business. It’s like any other negotiation. The biggest mistake is to lay down all your cards immediately, as it will only serve your buyer or seller to negotiate the price in their favor.