Do you want to take control of your financial future?
In the world of real estate investing, there are unique opportunities waiting for those with the vision and determination to uncover and seize them.
You’ll have the flexibility to set your own schedule, be your own boss, and reap the rewards of your hard work.
With the right skills, strategies, and tools, you can build a thriving real estate investment business that generates a predictable cash flow, delivers satisfying returns in both the short and long term, and leverages your investments to generate more wealth.
In this post, we’ll explore the main advantages of building your own real estate investment business.
Accumulate Equity & Build Lasting Wealth
Building equity is one of the most effective strategies for generating long-term, sustainable wealth.
With each mortgage payment you make, you simultaneously build equity, an asset that contributes to your net worth.
A growing equity base enhances your real estate investment (REI) business’s ability to leverage its assets for further expansion.
This leverage allows you to –
- Quickly buy & flip contracts as a wholesaler
- Purchase properties (available at a sizeable discount) at auctions as a cash buyer
- Buy distressed properties at a discount directly from homeowners (if you are using a dedicated system like REIgrow to reach out to potential leads to uncover hidden gems)
- Invest in repairs and turn a profit by selling the property at a higher price later on
Put simply, leverage allows you to amplify both your cash flow and net wealth. As your equity grows, so does your financial security and the potential for future growth.
Generate Passive Income
Your real estate investment business can acquire abandoned, vacant, or foreclosed properties at below-market value and renovate them into rental units that provide a steady stream of passive income. Income-generating rentals also tend to appreciate over time.
When you have a small portfolio and are still learning the ropes of rental property management, you may want to handle tasks such as maintenance, tenant screening, rent collection, and other day-to-day operations on your own.
This hands-on approach will provide valuable experience and insights into the process. As your business expands, consider hiring third-party property management companies to take over the operations.
This will allow you to focus on expanding your portfolio, closing more deals, and pursuing other growth opportunities.
Tax Perks & Deductions
Real estate investment businesses can take advantage of various tax breaks and deductions that can substantially reduce their taxable income (derived from properties in their portfolio). This can help maximize after-tax returns.
Deductible expenses related to property ownership may include mortgage interest payments, insurance premiums, marketing costs, property management fees, maintenance costs, and depreciation.
Investors can also utilize 1031 exchange to defer capital gains taxes when they sell an investment property and reinvest the proceeds into a new property.
Further, Opportunity Zones offer an opportunity to invest in vacant or abandoned land plots (in designated areas within the US) , allowing you to avoid capital gains tax.
Hedge Against Inflation
Real estate investments are among the most preferred asset classes for hedging against inflation.
For instance, if you happen to be a buy-and-hold investor and your properties appreciate at a rate higher than the rate of inflation, you can accrue capital gains.
Appreciation in property value will help preempt any wealth erosion caused by a steep rise in inflation.
Rental income typically increases in tandem with inflation, providing a steady stream of income that keeps pace with rising costs. The inflationary pressure is effectively passed on to the tenants.
Further, if you have a fixed-rate mortgage, your monthly payments remain constant even as inflation rises. The impact of mortgage payments on your overall expenses will diminish as inflation increases.
For example, during a period of high, unprecedented inflation, a fixed monthly mortgage payment of say, $10,000, will cause relatively less financial strain due to the reduced purchasing power of money.
Real Estate Investments Offer Stability
The stock market is susceptible to frequent fluctuations due to political factors, policy changes, and global events. Real estate investments (tangible assets), on the other hand, exhibit a greater degree of stability.
The graph below illustrates the contrasting trends in the U.S. stock market and the median house sale price, highlighting the relative stability of real estate investments.
Thus, owners of real estate investment businesses need not be concerned about sudden market peaks or valleys. For instance, house-flippers planning to renovate an abandoned property they recently purchased and sell it a month later need not fret about abrupt dips in property prices.
Learn As You Learn
Do you want to learn the ropes of real estate investing?
What better way to understand the market, cash flow, leverage, marketing, networking, legalities, and negotiations than by taking the plunge and building your own real estate investment business?
Final Words – Develop the Winner’s Mindset
A dabbler’s mindset won’t take you far. Many novice and part-time investors fall into this trap, obsessing over taxes, expenses, commissions, and fees.
Instead of building a real estate investment portfolio for the long term, they spend more time fretting over cutting costs, preserving cash, or (aggressively) guarding what they already own. As a result, they often act on a whim, rush to conclusions, or wait for a ‘fluke.’
In stark contrast, investors keen to build a bona fide real estate investing ‘business’ focus on ‘growth.’ They have a long-term vision guided by a business plan, a well-defined investment strategy, and a detailed operations plan.
They invest in cutting-edge real estate investment marketing software like REIgrow, hire & train employees to delegate tasks, leverage automation to save time & effort and optimize each process to drive efficiency and close more deals.
Once you resolve to build your own ‘business’ instead of treating the whole thing as a ‘side gig,’ you’ll notice a profound transformation in your mindset. You will gradually start developing a winner’s mindset.
This mindset shift will enable you to make strategic decisions, take calculated risks, and pursue opportunities that align with your long-term real estate investment goals.