What is an investment property? Generally speaking, most people consider any property that is purchased for use as a business or as a rental to be investment real estate. However, this is very short-sighted.
Every property you will ever purchase in your life is an investment property. Real estate is expensive and every time you commit funds to purchasing it, you should expect to make money from the deal. By following the guidance in this post, I can teach you exactly how to do it safely and sustainably.
This discussion sheds light on the exact meaning of investment when it comes to real estate purchases.
Investment Property to Live In
Even if you purchase a family home simply to live in, the property is likely to be your largest and most valuable investment. Yes, your family home is an investment at every stage, not just if you ever sell it. In fact, many people subscribe to the idea of owning a forever house and do not even think about selling the property in the future. So, is it still an investment? Sure!
There are many ways to make money with a home that you live in:
Of course, the most obvious way is to sell it for more than you paid for it. Buy low, sell high, right?
If you continue to live in the home and the value appreciates, then the equity you have in the property can be leveraged. You can borrow against this equity and improve your home, adding more value. You can also take a loan on this equity and purchase more property which will build your net worth.
You might also be able to expand your home and utilize part of it for business purposes or as an additional rental income even when you continue to live there.
Real Estate Investment
Most people consider investment property to be purchased to rent out. This is a great business plan. You will receive money each month from your renters that goes directly to pay the expenses on the property. Your rent roll may immediately meet all the property expenses, or you may have to subsidize it for a time until rents rise enough to cover the monthly expense. Either way, other people are paying so that you gain equity each and every month on the property. If you do this right, you can own the property outright in 10 or 15 years without ever paying any of your own money towards the purchase price! If you can pay cash for the property and avoid a mortgage, you can make up all the money even sooner and have full equity from day 1.
Rental income is just the start of traditional investment real estate. You can also utilize many properties for business purposes. You can utilize land and real estate for agricultural purposes. You can buy land strategically with the eye on selling it as part of a development deal. There are many ways to make your real estate purchases pay off big for you!
Investment Property Strategies
I like the idea of buying property for use as rentals, but never selling it. Just hold it, pay it off over time and use the equity to buy more property. You do not need to rush or use any drastic “get-rich-quick” scheme to buy 10 properties in 1 year… This can cause your financial ruin, in fact. Go slow and stay safe within your financial means. As you get enough equity to safely borrow more money towards a new property, do so and invest it carefully. Rentals tend to increase in cost each month over time. Meanwhile, the cost of the property remains the same, or may even be fully paid in an all-cash deal.
By holding your rental properties without selling, you can build generational wealth that will provide a sustainable income stream for you into old age and beyond for your heirs.
Remember that historical wealth has often been made from long-term real estate investments. Nothing much has changed. It is still good to buy property, as long as you do your due diligence and have a plan to capitalize on your investment.
