Strategies for Building Real Estate Equity
Investing in real estate is a great way to build wealth – if you get it right. It won’t turn you into a millionaire overnight, but if you’re looking for a strong long-term investment strategy, building real estate equity is the way to go.
For most people, their first – and most often their best – investment is buying a house. Generally the motivation is to have a home to live in without paying rent to a third party. That’s good, except that many people aim to buy their dream home without considering its value in terms of real estate equity. In reality, your first home is likely to fall of any type of “dream home” status simply because the average first-time home buyer doesn’t have the budget to achieve their dreams first time around.
Instead, your first home should be a house that will make a good rental property in the future, allowing you to make and save money that you can use as a down payment on another house. Keep one as a rental and live in the other, and within ten years you’ll be well on your way to a good, solid nest egg.
You Can Use Real Estate to Build Wealth
There is absolutely no doubt that a good real estate investment strategy will enable you to build wealth. By investing in rental properties, you can generate an ongoing income, and get very worthwhile tax benefits at the same time, particularly when you sell your home at a higher price than you bought it for. But most importantly, by maintaining the investment (buying again when you sell), you will build and improve your real estate equity.
Flipping property is another way to make money, but because you are simply buying and selling – and not renting out – profits are likely to be taxed as income.
Tips to Help You Identify the Best Real Estate Equity Properties
Where and what you buy as an investment is essentially personal choice, though to develop a successful investment strategy and build wealth, you do need to have savvy.
Generally, when accumulating real estate equity and aiming to build wealth, it’s best to look at reasonably new development areas, or neighborhoods that are being redeveloped. The best investments are those that boast a good location and are structurally sound, but look ugly and haven’t been managed well. A good location will grow your real estate equity and attract a better quality tenant, both of which are more likely to guarantee good returns on your investment.
For investment purposes it’s makes good business sense to make a down payment of between 20 and 25 percent because it reduces exposure and short-term risk. You don’t want to pay cash – using other people’s money is good for a real estate investment strategy. But you don’t want to borrow too much of the total just in case the rental market turns.
If you are looking for a good investment in real estate? Take a look and see what we can offer you.
Contact Southern Group Property Management for more advice on the Raleigh Rental Market.
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