Building wealth not only takes a lot of time and effort, but it also needs smart investing. And one of the best ways you can do that is by investing in real estate. But you might ask, how can buying and owning properties make your financial life better? Read on below to find out!
It Provides You With Regular Passive Income
Passive income is money generated by your assets. One way to use real estate as an asset is by buying a property and renting it out. As the owner-slash-landlord, you’re responsible for the real estate’s taxes, mortgages, and other maintenance fees. Thus, you need to charge enough rent to cover these expenses as well as to produce a profit. Now some owners tend to charge high in order to have their property yield profit immediately. But a better strategy in the long run is to be patient and wait until the mortgage has been settled; at that point, most of the rent will become your profit. The real estate’s value would have also appreciated by then, leaving you with a more valuable asset.
Another way you can turn your property into a passive-income-generating asset is by joining a real estate investment group. It’s basically like a mutual fund for rental properties. A company will buy or build a property or a chain thereof, and the potential investors will buy from them (thus joining the group). One advantage this arrangement offers is that it allows you to own multiple units of property without the hassle of being the landlord; the company will take care of these problems for you. In exchange for this management, however, they will charge you a percentage of the rent.
It Helps You Achieve Financial Independence
In the long run, you can also use real estate to enlarge your asset portfolio and build your wealth. You can do this by using the money generated by your properties to acquire more assets. You don’t necessarily have to buy just real estates; stocks and bonds are also good assets. The more assets you own, the more passive income you’ll have. And the more passive income you have, the less you’ll rely on your active income (the money you earn by working a job). Thus, you’ll have a sizeable financial parachute in case of bad times coming your way.
It Makes Your Life Better
With more money to spend, you’ll be able to increase your standards of living. A good lifestyle doesn’t come cheaply nowadays. But by using the profits generated by your real estate and other assets to cover for the expenditures, you’re well on your way. You can buy that Subaru WRX you’ve been drooling at, or even that house and lot in Tagaytay Highlands’ Sycamore Heights you’ve been dreaming about!
A word of caution regarding high-maintenance lifestyles, though: Don’t let your liabilities become more substantial than your assets. Assets give you income; liabilities gives you expenditures. To maintain the lifestyle you want, make sure your asset lists are longer than your liabilities. Otherwise, you’ll soon find yourself spending money you don’t have.
One Last Thing
As you might have noticed, we’ve only scratched the surface on how your real estate properties can serve you as a smart investment. It just shows how much financial potential there is in the real estate market, although as with other investment vehicles gain is not assured. So better make careful choices and calculated risks before diving in!