How to Work Smarter (Not Harder) as a Real Estate Investor

While proponents of “get rich quick” schemes might say otherwise, there’s no doubt about it, the best way to grow your wealth is through hard work –and smart investing.

The truth is, there’s no silver bullet for guaranteed financial freedom, but the best solution, by far, is finding solid investments that you can use to grow your money –at a rate that’s far faster than socking away cash alone. And one investment that many investors have been turning to for years –is none other than real estate.

Real estate, particularly rental property, is an especially good alternative investment, and a great asset to have in your portfolio. The great thing about real estate, is that it’s something that everyone –from seasoned investors to everyday homeowners, can invest in. With income property, the benefits are largely two-fold –meaning you can generate both immediate returns –in the form of rental income, as well as the long-term benefit of property appreciation.

But how can you get started with real estate investing? And once you have two or three properties under your belt, how can you ensure that you’re making the most of your time –generating returns that are commensurate with the resources that you’ve invested?

How can you get the best return for your money?

The secret is in working smarter. Let’s see how that breaks down practically now.

How Real Estate Can Help You Secure Your Future

While the term ‘securing your future’ might sound elaborate or somewhat distant –the truth is the concept of securing your future, couldn’t be more practical.

Securing your future simply means working your way to financial freedom. It means becoming financially independent, and set for the future.

Real estate is an avenue that can lead you to a place where you are set financially. With this in mind, here’s a look at a few ways that adding real estate to your portfolio can pay off –helping you to grow your wealth for years to come.  

• Cash Flow

Having multiple streams of income is important –both for now, and the future. In fact, long-term wealth creation strategies are often contingent on establishing income streams. Rental properties are one investment that allows you to benefit from cash flow, every month –for as long as you own, and are renting, the property.

• Property Value Appreciation

In addition to cash flow, you’ll also benefit from long-term appreciation, as your property –ideally, increases in value. This can provide an excellent hedge against inflation –should you choose to sell one day.

• Leverage

Real estate is a unique investment in that it allows you to use other people’s money –namely, the bank’s –to grow your own. You make a down payment, and the bank will put in the rest, allowing you to benefit from returns on both your portion as well as the bank’s; enabling you to grow your wealth far more quickly than you’d be able to on your own.

• Diversification

Real estate also offers the chance to diversify your assets. Investing in different properties, across different markets can help to offer some diversification to your portfolio.

• A Tangible Asset

One aspect of real estate that appeals to many investors in the fact that it’s a tangible asset –with immense practical value. You can see it, touch it, live in it –it has real value.

Putting Your Money to Work for You: A Framework for Those With a High Level of Income

As we advance our career –or build up our business, many of us eventually reach a point where we start to think about our income –wondering if there’s a way to put some of it to use, to work for us.

While you’ll want to reinvest much of your capital into your business for a while, eventually you may want to start diversifying some of that money. This is where the concept of active income and passive income come in.

When it comes to a business, or your livelihood, there’s a good chance that it’s very much a source of active income. Businesses are often very much contingent on you. You being there, you putting in the hours, you being able to work. But when it comes to taking time off, or retiring, or selling your business –you run into trouble because it’s very much dependent on you. Without you in the driver’s seat, it wouldn’t last that long.

Real estate investments, on the other hand, when done right –and with the help of a solid team, is a passive income stream. Your investments aren’t going to falter if you’re not there to personally oversee them, and you can easily head off on a three-week vacation without the entire thing collapsing on itself.

You work hard for your money, so why not make your money work hard for you? Having passive income out there working for you, that’s not contingent on you, is important. Real estate can prove to be a pivotal part of any exit plan, allowing you to retire securely –without having to worry about your future income.

With this in mind, let’s take a look at some things that you can do now, to set yourself up for success later on.

• Educate Yourself

First things first, it’s a good idea to start learning the basics. It’s a good idea to brush up on the ins and outs of rental investing –and familiarize yourself with what’s involved with overseeing a property. Learn the basics, determine the type of property you’d like to invest in –a single-family residence, a duplex or triplex, apartment complex, or commercial real estate. Work to build a solid foundation before you start.

• Start Small

Even if you do have the resources to ‘go big or go home’ it is often recommended that you start small. Consider buying one property and familiarizing yourself with it before you go out and buy ten houses. Starting small can help you learn the ropes, gaining more experience as you go along –before there’s a lot more at stake financially.

• Get an Appraisal

This one cannot be emphasized enough. You need to know going in how much a property is worth before you buy. Unless you’re a real estate agent, or extremely experienced in real estate investing, you’ll want to ensure that you’re working with a good investor-friendly real estate agent.

While many investors today are turning to Zillow’s Zestimate® tool for home valuation, this approach isn’t without its risks. Zillow is indeed a good first step when assessing values for quick back-of-the-napkin numbers, but it’s not 100% accurate and it’s not an end-all solution for appraisals. When it comes to taking that final step and purchasing a property, you’ll want to ensure that you know exactly what it’s valued at, and that means getting in touch with a good real estate agent, and having a professional appraisal.

•         Buy Consistently Over Time

Slow and steady wins the race –at least when you’re in it for the long term. With real estate investing, long-term wealth creation is about starting early, and applying an accumulative approach to your investments. While this doesn’t mean that you should blindly ignore the market, it does mean looking to add to your portfolio consistently and investing with a long-term perspective. Whereas fix-and-flips are very much contingent on timing the market, rental property investments are a long-term investment, and therefore less subject to short-term volatility in the market. Do your best, make intelligent decisions, but know that you have a bit more breathing room than if you were doing fix-and-flips.

•         Build a Team

Finally, don’t neglect the importance of assembling a winning team to help you manage your properties while freeing you up to focus on your investment strategy. While it’s true that many landlords opt to go it alone, and you can oversee your properties yourself, at least in the beginning, once you start growing your portfolio and purchasing new properties, keeping up with their management becomes a lot more involved.

You’ll want to find some trusted professionals that you can turn to, to help you navigate the process. Find qualified people that you can trust, don’t just outsource the jobs to anyone.

Here are a few people you should consider adding to your team:

A Real Estate Agent – Find an investor-friendly professional. Not all real estate agents are alike. As an investor, you want someone who’s passionate about investment real estate and understands every aspect of it. You want someone who’s familiar the concepts and terms –yield, growth yield, expense load, and who has the ability to find and source investment properties for you.

A Mortgage Lender – Some of the best mortgage rates and deals that you can find will be through your local community bank. Go to your local bank, talk to a commercial mortgage banker –try to establish a rapport with them, and work with them to obtain the right financing on the right property.

A Property Manager – Find someone local to your market who understands all of the laws surrounding leasing a home and screening residents, as well as what’s involved with successful advertising, lease enforcement, and rent collection. A good property management team will also be able to guide you to reputable vendors and contractors who will be able to perform maintenance and repairs for you.

The right team can help you increase your chance of success substantially. Interview them; don’t go with the first person that you find. Make sure you find professionals who align with your values –then assemble your team.

For many, the thought of investing in real estate can be daunting, but it doesn’t have to be. Be sure to take advantage of helpful tools and resources that are available today, and brush up on your knowledge of real estate investing so that you’re fully prepared.

Remember, investing in real estate, in many ways, is like starting your own business. It takes a lot of time, effort, and hard work; but when done right, it can reward you with excellent returns. But unlike a company, that requires your direct supervision, with real estate; the end result is a fully autonomous venture –passive income streams that are completely independent of you.

Work hard, earn hard –and put your money to work for you. Real estate makes it possible.

Are you thinking of getting started with real estate investing? If so, you’ll want to claim your FREE resource from Renters Warehouse: Guidebook: So, You Think You Want to Buy an Investment Property?

Maybe you already own a rental property and are looking to expand your portfolio. In that case, be sure to get ahold of your FREE guide: Guidebook: So, You Want to Grow Your Investment Portfolio?

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