Real estate investing is nothing new.
In fact, it dates back to more than a century ago, beginning in the 1890’s in the United States. People have always flipped houses, apartments and condominium units – buying when the market prices are low and selling when the market prices shoot up.
Almost 550,000 people in the US don’t even have a roof over their heads, while only 34% of American homeowners don’t owe anything on their home. The remaining 66% have some kind of mortgage, in one way or another. And this doesn’t just include the middle class. Even rich people take out loans. Only they call it an ‘investment’ and not a debt.
You may be asking, “Why this? Haven’t rich people learned from the 2008 housing bubble yet?” In this article, we ask: why exactly do rich people invest in real estate?
Benefits of investing in real estate
To answer this question, one only needs to discuss the various benefits of investing in real estate. Listed in this article are five benefits that rich people get when they invest in real estate.
- Real estate can be an investment. Many people, especially high-income-earners, view real estate simply as padding for their assets list. In fact, some people collect houses just to have something to show in their name. The big problem is when the houses are paid through a mortgage since accidents or unexpected problems could instantly force a family into selling their house even before they’re ready to leave.
- Houses can be flipped for money. Flippers, with or without a real estate agent, can make a good buck by simply buying older models of houses, fixing them up a bit, and putting them back to the market. These houses will then be sold for profit before the flipper moves on to the next job.
- Rental income can be made by leasing it out. Rich people also invest in real estate since it’s a good financial instrument to have if you want to receive passive income. Passive income refers to the money made through various non-work related activities. Investing in a good rental property could actually be a lucrative form of business if you’re looking for passive income.
- Buy-and-hold strategy works on houses too. Do you trade stocks? If you do, then you’re already familiar with the buy-and-hold strategy that many rich people already know. Buy-and-hold is a stock market term that refers to buying a certain stock and then just ‘holding’ it until it reaches your target price.
- Real estate properties are limited goods. No matter how much the population of Earth increases per year, land will always be finite in number, which means that real estate properties are limited goods. Although the market dips every now and then, limited goods like real estate will never truly drop in value, and rich people know this.
Real estate investing 101 with rich people
The good thing is, there’s no minimum salary requirement that you need to reach if you want to start investing. You’re basically free to invest in whatever you can afford, be it stocks, bonds or, in this case, real estate. To invest, all you need to do is to pick out a certain financial instrument, put money on it by buying shares or titles, and watch the money grow as you sleep.
Obviously, something as big as a house would also cost as much, so if you’re just a beginner investor, it’s probably not going to happen. If you’re a rich guy who just happens to be a beginner investor though, one of the things that you’re most likely going to invest in sooner or later is real estate. And considering what we just talked about in this article, we’re definitely not going to stop you.