Real estate is one of the best ways to build up and maintain your wealth. There are several shows on television about real estate flipping but that’s not the only way you can earn through this asset class.
More than Buying and Selling
Most real estate shows tout buying houses that have potential or are valued below market, fixing them up, then selling for a profit. This method can be risky. If you are unable to sell quickly, your profits can be eaten up by the mortgage. In addition, if you hold the property for less than a year before you sell it, you will be taxed at a higher rate compared to keeping the property for at least a year.
You Can Buy and Build
Buy a piece of land, build on it, and sell it or pieces of it. Acquiring a large piece of raw land means you can build multiple structures on it and you can subdivide it to sell individually. This will require expertise: not for you, but for your entire team. This is best for those who own a construction company. If you wish to go down this track, consider at least forming a small team for the purpose. It can be more cost-effective in the long run as you may find yourself involved in a lot of building.
Starting Your Team
For both methods, you can benefit from having your own company. Prepare a business plan so you can get the necessary funding. You will also need a legal entity to get permits and your business registered. Rent or buy equipment, depending on what you will need most. Especially when you are starting out, construction cost estimating software can be very helpful. This will allow you to figure out the cost of each of your builds. Knowing that makes it easier to estimate the best price point in selling.
Think of your financial situation before diving into this or any other investment. Remember that each investment option brings unique challenges that you may need to prepare for.