You’ve likely heard of property investors striking it rich, and the statistics back up the idea. Over the past 200 years, more than 90 percent of the world’s millionaires got their wealth at least partially by investing in real estate.
There are some good reasons for this, as you’ll see, but first, it’s important to recognize that you don’t have to be a monocle-wearing, top-hat-toting real estate genius to build wealth with property investing. In fact, almost anyone can become financially successful by investing in property—as long as they approach it correctly.
Why Property Investing?
Real estate investing has a handful of advantages that make it ideal for generating wealth, including:
- Permanence and reliability. Real estate has always been a valuable commodity, and likely always will be. Land is finite, and people will always need places to live, shop, and work, so your investments are unlikely to lose value over time.
- Flexible approaches. There are many different ways to become a property investor. For example, you could focus on long-term growth, targeting neighborhoods with low home prices and lots of future potential, hoping to turn a profit. Or you could capitalize on rental income, focusing on buying residential properties and generating cash flow from tenants.
- Expansion potential. Buying your first property can be difficult, but once it starts making money, you can use the proceeds to buy another property. And another, and another. It’s a strategy that lends itself to rapid expansion (and exponential growth).
The Limiting Factors
If real estate can make you rich, why isn’t everyone investing in real estate? There are a handful of limiting factors that serve as gatekeepers to property investing, but you can overcome them if you have the right strategy and/or mentality:
- Access to deals. Not every real estate transaction is going to be valuable for the buyer. If the property is in bad shape, if the price is too high, or if the neighborhood is going south, the property could be a bad buy. The great deals—the low-priced, good-condition properties—can be hard to come by. Real estate agents generally get first-line access to deals like these, so if you want better deals, you can become a real estate agent yourself, or build a good relationship with someone who already is a real estate agent.
- Access to capital. Buying your first property can be a challenge. If you have a good credit history, you can get a loan for the bulk of the purchase price, but you’ll still need to make the down payment. Accordingly, you’ll need to have some access to capital to bolster your purchasing power. Once you get the ball rolling, and your properties start generating cash, it will be easier to fund deals in the future.
- Strategy and experience. There are many “wrong” ways to approach real estate investing, and many ways your deals can go wrong. If you don’t plan for your expenses intelligently, if your property suffers damage, if you have a bad tenant, or if you struggle with vacancies in a rental property, your best-laid plans will be compromised. Generally, as you get more experience, you’ll find ways to prevent and mitigate these problems in your strategy. But when you’re first starting out, they can eat into your profitability.
- Long-term protection. After generating wealth with a series of properties, you’ll need to consider expanding or rebalancing your portfolio. Though real estate is reliable, there’s always the possibility of a real estate market crash—and if your assets are exclusively tied up in properties, a crash could financially ruin you. Most property investors balance their risk by also investing in other assets, like stocks, bonds, and mutual funds.
Getting Started With Real Estate Investing
The bottom line here is that real estate investing can genuinely make you rich—if you know what you’re doing. As a novice investor with no money and no experience, you’ll have a hard time finding or even recognizing good deals. That said, you should be able to find a way in.
If you’re interested in getting started with property investing, it’s a good idea to read online resources and familiarize yourself with the fundamentals. Review multiple sources, and take the advice that seems common among all of them. Then, attend a meetup or networking event in your area; chances are, your city has at least one recurring gathering of property investors. Talk to the people there about your interests and your potential strategy, and ask around to see if anyone is willing to mentor or educate you. If you’re serious about your future as a real estate investor, you can also begin taking online classes to get your real estate license. Either way, you’ll have a path forward.