For many people, real estate investments are a key strategy to grow wealth and get set up for success. As I always say, there’s a reason why all of those millionaires and billionaires have strong real estate portfolios. There are many tax advantages, allowing you to keep more of your wealth, including the capital gains deferral and deduction of operating costs.
Real estate investments also diversify your investments to avoid having all of your wealth in one basket (AKA the stock market) so you can better weather turbulent economic times in the future. Real estate investments can also allow you to bring in passive income and get paid for doing basically no work.
Now to make all of those benefits a reality for you, you need to get into the “how” of real estate investments. When you think about investing in real estate, you likely go right to rental properties, which are a great starting point.
Rental properties are pretty straightforward. You buy a property, give it a little TLC, and then rent it out for more than you pay on the mortgage/maintenance. As a result, you get to profit while building equity, which is a major way to build wealth!
You can also look at house flipping, where you buy a fixer-upper for cheap and then give it a makeover and sell it for a profit to buy the next home, fix it up, profit, and so on. This is a great way to take advantage of the capital gains tax deferral and really grow your wealth.
A new real estate investment method, called house hacking, has also started to take off in the past few years. House hacking is when you buy a home to live in while also renting out a room or a level to someone else. You take the rent and put that towards your mortgage payment, which allows you to basically live in the home for free. Then, once you save up enough for another down payment, you can do the whole thing again while keeping the first property as a rental.
Real estate investing comes with so many benefits, both long-term (investment diversification) and short-term (passive income). But the best part is that there are so many ways to get started from buying a rental property to house hacking.
If you want to talk more about real estate investments and how you can get started, just reach out to any one of us on the SIMS BLUE team!