Have you heard about people becoming millionaires through real estate investment and thought it is a dream? Or has someone ever asked if you are interested in property investing and you viewed it as a scam? Well, it is time you face the truth and learn that property investing is one of the wealth-building ventures that you can make millions in a flip of your fingers. Maybe, it sounds like that promising television salesperson trying to convince you to visit their offices and get gifts for attending their seminars.
But what you need to know at the end of the day is that you could be the next millionaire, only if you follow the simple guidance from the real estate gurus. In this article, let us look at the millionaire guide on property investing and how it helps you get more prosperous. But remember, legit lenders, such as Bugis Credit, can give you investment tips.
Wealth Generators in Property Investing
If you decide to jump into real estate investment, then you should learn about the business and how you will profit from it. Learn how the business is run and all the strategies involved. This includes having brief knowledge of the following four wealth generators in the rental housing market;
Cash flow is the regularity in the monthly or annual income you will get from the property. In the housing market, cash flow fluctuates depending on repairs needed on the property. This means that, in some months, you will have higher cash flows than others. Moreover, cash flow is also affected by other dynamics such as;
- Vacancy: The amount of time the house remains vacant earning zero income.
- Capital expenditures: These are the expensive maintenance projects that are needed to keep the property in excellent conditions like new roofs, windows, plumbing systems, and other appliances. Capital expenditures, when often replaced, will take most of your cash flow.
- Regular utilities and management expenses.
Appreciation is defined as an increase in the value of the property over time. Although property appreciation is not guaranteed, there has been an average increase of 3% in American property investment per year for the past century. Mostly, there is what we call a forced appreciation where the property owners forcefully increase the value by improving the physical conditions of the property. This will automatically earn you profit when reselling the property.
Loan pay-down is when you pay your mortgages indirectly through your tenants. To make it more transparent, when you acquire your property on mortgage, the loan will decrease monthly as your tenants pay the rent. For instance, if you took a mortgage for an estate worth $2,000,000, the first months will probably have zero cash flow. But after one or two years after you have cleared the loan through your tenants, you will become the property owner with no outstanding loans. This is a way of generating wealth because you will not use your cash to finance the mortgage, and at the end of the day, you will be the rightful owner of $2,000,000 worth of property.
The real estate investors are said to benefit from low taxes charged on their properties than any other business. The U.S government came up with a plan to encourage property investments by introducing extra tax write-offs and eliminating self-employment tax. These moves help the rental housing investors to pay low taxes than other investors; thus, they can use the bonus cash to pay for mortgages and acquire more wealth.
As a young investor, or if you are planning to enter into property investing, you are advised to understand the above wealth generators in the industry before making a choice. However, apart from learning about the basics of the housing market, you should also make self-assessment and ask yourself if the business is your dream. This involved doing the following;
Setting Your Goals and Planning of Becoming A Real Estate Millionaire
Without a goal, there is absolutely nothing you are going to work on and achieve. Every business requires you to develop your goals and strategies to push you all along the journey. Now that you have learned about the main wealth generators, why don’t you come up with your goals and how you plan to become a millionaire? During your goal setting, you must learn to answer questions like;
- What kind of property do you want? There are a lot of properties listed in the market. Choose your targeted property before going to the market.
- What is the main reason you choose that property? Why do you want that property?
- How will your life change or look like after investing in the rental housing market?
- When are you going to achieve your goals? Set your goals with a definitive date to meet them. You don’t need the whole life to become a millionaire.
- Most importantly, how are you going to accomplish your mission? This is the critical part because most people make their plans, but they end up stacking in their pillows. Why? Because they do not come up with ideal means and strategies to achieve their dreams. You only need to walk out of your comfort zone and face the successful investors who will help you work on your plan.
Note: your goals should be broken into smaller milestones that you will accomplish as you move closer to your bigger goal. Plan what you need to achieve every day. After setting up your goals and revising them, move to the second step
Get Started and Stop Wasting More Time
Immediately you have your plan in place, start looking for affordable deals, and commit to achieving the first goal. Unfortunately, most new investors fail, not because they did not plan, but because they never started the journey. You may have a comprehensive plan but fail at the initial stage because you did not take up the challenge. At the end of every day, ask yourself, have I achieved anything?
Include Affordable Terms in Your Offers
Financial analysis is so crucial in property investing. Before jumping into any deal, ask yourself if you can afford the terms set by the seller. Also, write down the conditions that are affordable to both of you when making an offer. You are a new investor, so do not come up with extravagant terms that will force you to take more loans or fall on your knees, pleading with the seller.
There is a lot to be said about becoming a real estate millionaire. The property investors would tell you that succeeding in the rental market is so hard and easy on the same measures. It all depends on how you take it and how you are prepared to travel on the road. My advice is: find the successful local investors, have coffee together as you ask for guidance from them, and start moving.