Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Wisdom

5 Reasons to Become a Real Estate Investor

Investing in the property market can offer great results at the expense of requiring a more hands-on approach to investment than other methods. Having in-depth knowledge of the industry and access to funding can make it much easier to get started. However, you can learn about real estate investment for free online, and becoming an investor in this market requires less money than many people realize.

That means you probably start investing in this market with at most a couple of years of preparation. And given that you can, the question then becomes: should you? Here are some of the reasons why the answer may be yes.

1 – Build your wealth

Most common types of property investment involve getting mortgage loans, buying homes or apartments, and renting those living spaces for more money than it costs to pay the mortgage. This means that while mortgage payments will be an ongoing expense for years to come, that money isn’t going to waste. Every mortgage payment increases your equity, which adds to your wealth. You can recover this money later by selling the house or remortgaging the property.

If managed correctly, your investment assets can also do wonders for your credit score. A credit score that can be used to access more capital for real estate investments, or as a way to secure funding for all kinds of other financial products. Want to have your own startup someday? Starting off as an investor will make that much easier.

2 – Get stable assets

Real estate is not the safest way to invest your money, but it is one of the safest, offering a good balance of risk and potential profit. As long as you get insurance for your properties, it’s nearly impossible to have your wealth wiped all at once when you are invested in this market. And even if recessions bring down the property value of your homes, you’ll likely still be able to collect rent on the properties, and the sale value will bounce back in a few years.

This makes this a quite stable market for anyone who has the luxury to measure the return on their investments in decades. 

3 – Potential for exponential growth

The more mortgage payments you make, the bigger your equity on your existing properties will be. Combine that with a rising credit score, and you reach a situation where the longer you operate as a property investor, the easier it’ll be to get funding for more investments, which can trigger rapid growth over the years. Especially if you are willing and able to form partnerships with other talented investors, and you manage your credit properly.

The nice thing about positive feedback loops is that they are only partially luck-dependent. Yes, luck will play a role in how well your investments go at first. But once you pass a certain threshold, positive feedback loops can lead to massive growth over a few short years. And as mentioned before, the stability of the real estate market means you’ll likely be able to hold on to those gains, even if the period of exponential growth eventually hits a natural ceiling.

4 – Market diversity

There is more than one to make money from investment properties, which gives you the flexibility to handle these assets in varying ways. For example, if renting a house the old-fashioned way isn’t working, you can list it as a seasonal home on other apps. Or you can sell it and pocket the difference between the house’s initial and current value, profiting off the property’s appreciation.

Lack of liquidity is one of the downsides of investing in the property market, as home sales can take months. However, it is possible to sell homes much faster if you sell them to a company, as you’ll learn if you ever try to sell your house without a real estate agent in Memphis. This means that investment properties aren’t necessarily hard to liquefy; they can be reliably sold in two weeks or less if you are willing to take a financial loss and know which companies to contact.

5 – Be your own boss

There are many ways to go about investing in the property market. You can form a partnership with other investors or hire other people to help you. Or you can go about it alone and take a mostly DIY approach. Either way, if you make a living as a real estate investor, you won’t need a boss. Instead, you can set your own hours and make your own calls. And as your position in the market grows, it will eventually become viable to hire people to help you manage your properties.

Many investors get into the property market in the hope of turning it into a way to earn passive income. And while taking a totally hands-off approach is not ideal, this is a good industry for people who hope to eventually be able to slow down and work shorter weeks.