Yes, you can build wealth with real estate. Real estate can be a great investment for those looking to create long-term wealth. There are a few things to keep in mind when considering real estate as an investment, such as location, property type, and financing.
Location, location, location:
When it comes to location, it is important to consider the rental market in the area. Properties in areas with high demand and low vacancy rates can be good investments. It is also important to consider the type of property you are investing in. You may want to start with purchasing a single-family residence. Decide whether you will manage the property yourself or hire a property manager. If a property is within a 45-minute drive or less of your residence, you may feel confident you have the time to self-manage.
Property type:
Many individuals and couples start their real estate portfolio by buying a 1-4 family residence. rental units. These types of properties provide the potential for rental income and appreciation.
An apartment building is also a great investment. These types of rental properties may require more management than a single-family residence, but they also have the potential to generate higher rental income.
Financing:
Another thing to keep in mind when considering real estate as an investment is financing. Financing can be a great way to leverage your investment and create wealth. For example, if you have owned your primary residence for ten or more years and have built up equity, you may be able to take out a home equity loan and use the funds toward the purchase of a rental property.
Hard money lenders are another option to finance your real estate investment. Hard money loans are typically short-term loans that are backed by the value of the property, not by your credit score. This can be a good option if you are looking to invest in fixer-upper properties.
Remember, financing changes for larger properties. Anything with 5 or more units is considered commercial in the eyes of a lender. Underwriting qualifications are usually more stringent, rates may be higher, and the down payment requirement may be more than for a 1-4 family unit.
