Every few weeks The Rules of Thumb blog from MoneyThumb likes to dedicate a blog post to tips and advice for lenders. We usually offer information that is helpful to bankers and private lenders. However, today we would like to broach a subject we haven't covered before, and that is real estate investing.
If you have some disposable income and are considering becoming a real estate investor, we'd like to start off by suggesting strongly that you read this article from The Balance. The article is titled Real Estate Investing for Novices. It does a fantastic job of showing beginners how to become real estate investors. We have included the first few sections of the article to get you started:
"Simply stated, when investing in real estate, the goal is to put money to work today and allow it to increase so that you have more money in the future. The profit, or "return," you make on your real estate investments must be enough to cover the risk you take, taxes you pay, and the costs of owning the real estate investment such as utilities, regular maintenance, and insurance.
Real estate investing really can be as conceptually simple as playing monopoly when you understand the basic factors of the investment, economics, and risk. To win, you buy properties, avoid bankruptcy, and generate rent so that you can buy even more properties. However, keep in mind that "simple" doesn't mean "easy." If you make a mistake, consequences can range from minor inconveniences to major disasters. You could even find yourself broke or worse.
The 4 Ways Real Estate Investors Make Money
When you invest in real estate, there are several ways you can make money:
- Real Estate Appreciation
It is when the property increases in value due to a change in the real estate market, the land around your property becoming scarcer or busier like when a major shopping center is built next door or upgrades you put into your real estate investment to make it more attractive to potential buyers or renters. Real estate appreciation is a tricky game. It is riskier than investing for cash flow income.
- Cash Flow Income
This type of real estate investment focuses on buying a real estate property, such as an apartment building, and operating it, so you collect a stream of cash from rent, which is the money a tenant pays you to use your property for a specific amount of time. Cash flow income can be generated from well-run storage units, car washes, apartment buildings, office buildings, rental houses, and more."
To read the other two ways real estate investors make money and the remainder of the article from The Balance, follow this link. The Rules of Thumb blog from MoneyThumb would also like to share a free e-book offered by Lending One. The e-book is titled Get 5 Steps Closer to Growing Your Fix and Flip Business. Here is a link to download the free e-book. If you have watched some of the famous TV shows about flipping houses, then you know how much fun they have and how much money they make.
To assist you in your new real estate investing endeavor, MoneyThumb has PDF financial file converters specifically designed for lenders. You will be able to quickly and seamlessly convert financial files to make the process of being a real estate investor so much easier using our tools.