Real estate investing can be very lucrative, in spite of this economy or housing market. For many years plenty of people that are wealthy have gotten that way through investing in real estate. Our real estate investments have been one of the key factors to our working at home success. I believe that if strategically executed, real estate can still be a good idea for those that think long term, that is. Here’s why.
The real estate market has experienced an artificial bubble over the last several years, raising housing prices far beyond what the true value of the property. Now that bubble has burst and prices are coming back down to the true value, many people have “lost” money in real estate. I could go on about this, but I won’t. (I do discuss this and our story in Christian Real Estate Investing) I am not talking about flipping houses. The type of real estate investing I am talking about and recommending here is investing for long term residual income.
For the Christian, investing in real estate for the long term has several benefits. For one, real estate investments can bring ongoing financial profits every month, that is residual income. This is a great way to build wealth. Not only do you get rental income now, on an ongoing basis, but you can also pass it down to your future generations. This is a biblical principle. Also, if you chose, you can also use your real estate investments to further the gospel by setting up trusts for Christian missionary organizations. That is what my father-in-law did.
There are many things you need to consider if you are interested in investing in real estate for residual income purposes. When considering a property for rental income purposes, you will need to take into account:
Expenses:
- Property Taxes. You will need to know how much it will cost you in taxes. Every year, you will have city/town and county property taxes, school taxes, and water/sewer taxes. If you have a mortgage, this will be added into your payment each month. If you do not have a mortgage, you will need to account for this monthly or you could find yourself with a lien on your home.
- Repairs and Cosmetics. This could be a major expense and your costs will depend on the condition of the property, your carpentry skills, and your budget. If you are not skilled, you will need to hire this out.
- Insurance and Legal. Always maintain homeowners insurance on your property. There are many places to get leases and the like, including downloadable forms. And the advice of a good attorney is always something worth paying for.
Income.
- Rents. Pricing is key. You need to determine the right monthly rent amount for your property. A good way to do this is to get out the newspaper and shop your market.
- Rental Management. If you do not want do this yourself, you can employ a rental or management company to collect your rent. Some real estate agents do this and others do it all in house- that is they also take care of repairs and maintenance on the property. This will free up your schedule, but will cost. While many beginning real estate investors will probably have to start by doing it themselves, outsourcing rentals and repairs is the way to go. That’s what makes the residual income passive residual income.
There are many aspects of building a home real estate empire. I go through this information in much greater detail in my report – Christian Real Estate Investing. I talk about our real estate story, how we have used our properties to help others, guidelines for responsible and profitable flipping, and a host of other issues. While renting properties can be a real pain in the you know where, there are so many benefits to incorporating real estate into your work at home portfolio:
- Larger market for renters, as the mortgage market tightens it’s purse.
- No self-employment tax on rental income
- Appreciation of property value over the long term
- Increases your net worth
- Expenses for repairs and other items can be tax deductions (consult your accountant!)
If you stick with the real estate investments, you will eventually profit from them. Don’t look for an overnight windfall. You have to build your wealth with real estate investing. There will be those times when the economy and real estate market will change. However, you will still be able to profit from it, as long as you hang in there.
Here are some resources for further information:
Rich Dad – Robert Kiyosaki’s books and other products related to real estate investing
Real Estate Investing Secrets and 101 Real Estate Investing Resources
Donald Trump’s Blog and information on real estate investing
Realtor.com Database of real estate properties; includes properties for real estate investing
Multiple Listing Service, used to search for real estate properties, including those for real estate investing
LegalZoom.com – Leases and Other Legal Real Estate Forms
