3 Ways to Create Wealth With
Real Estate Investing

By Mark Lemmons  I  May 9, 2022

Did you know that 90% of millionaires made their fortune through real estate investing? Real estate continues to be one of the most lucrative sectors in the U.S. If you’re looking to create wealth, the real estate market should be on the top of your list for investment exploration.

In this post, I’m going to reveal 3 ways you can create wealth with real estate investments. Whether you’re looking to make a large investment or start with something small, you can find a place to start that’s right for you in one of these options.

Remember to speak with a financial advisor or real estate expert before making an investment decision. Real estate is a great place to invest your money, but unless you know what you’re doing, you could risk losing a lot of money!

Let’s dive in.

1. Investing Directly in Residential and Commercial Real Estate
The traditional way to make money in real estate is to invest directly in residential or commercial properties. Residential properties include anything that is single-family living or under 4 units. If a building has 5 or more units, it is considered a commercial property.

After you purchase the property, you can rent it out and have enough to pay your mortgage and make a monthly profit. This means that you will be the property owner or landlord for either a residential home, a multi-family property, or a commercial property. Residential homes can be great because they are more straightforward and you have a lot of control in the process. Multi-family properties (apartment complexes), can be a little more complex, but can also provide a larger return on investment.

This traditional way of investing in real estate is popular for a reason. The ROI for this type of investment is higher than investing in stocks. Since 1970, the average annual return on real estate is 11.42%, while the S&P 500 averaged 10.31%.

Here’s a breakdown of what you would need in order to invest in each of these areas:

Residential real estate

  • A down payment and financing
  • Funds for any property rehabilitation
  • Time to find tenants, handle administrative tasks, and perform minor maintenance

Multifamily real estate

  • A down payment and financing
  • Funds to hire a trusted property management company

Commercial real estate

  • A down payment and financing
  • Time to manage the property or funds to hire a property manager

Each of these investments can have big returns. Residential real estate tends to appreciate in value, providing long-term benefits. Multifamily real estate is a great investment because it’s easier to control the value of the property and requires less involvement from the owner. Commercial real estate comes with lease longevity, providing stability and predictability.
2. Investing in Real Estate through Funds, ETFs, and Stocks

Another way to make money with real estate investing is through funds, ETF’s, and stocks. In this case, you can essentially reap the rewards of the booming real estate business without the added burden of property management or direct responsibility for the property. As previously mentioned, your return rate will likely be lower, but so will your day-to-day involvement in the investment.

Real estate stocks can include any publicly traded stock for a business involved in the real estate market at some level. These could be:

  • Real estate brokers
  • Financiers
  • Technology companies
  • Manufacturers
  • Retailers
  • Developers

Investing in stocks can seem scary, but with the right help, it can be incredibly profitable. Many people only think of purchasing property when they think of real estate investing, but you can also invest in it via the stock market. It’s important to note that the buy-in with the stock market can have a much lower price tag than purchasing properties directly.

U.S. News just released a list of the top 8 real estate stocks to consider in 2022.

  • Prologis Inc. (PLD)
  • Equinix Inc. (EQIX)
  • Realty Income Corp. (O)
  • Equity Residential (EQR)
  • Alexandria Real Estate Equities Inc. (ARE)
  • Extra Space Storage Inc. (EXR)
  • Weyerhaeuser Co. (WY )
  • Mid-America Apartment Communities Inc. (MAA)

If you are a busy professional looking to invest but don’t want the financial investment of an entire property or the hassle of being a landlord, the stock market might be the right choice for you.

3. Investing in Home Flipping and Home Flipping Companies

Finally, another way to create wealth with real estate is by investing in home flipping or home flipping companies. In the home flipping scenario, instead of purchasing a home to rent it, you purchase it to renovate and sell. Flipping properties is a way to make active income. You will get a faster return on your money, but you’ll also pay more up front in terms of renovation costs and taxes.

Typically, there are 2 ways to invest in house flips. You can either purchase a home below current market value because they are in financial distress, or you can purchase a home that needs renovations (a fixer-upper). In either case, the goal is to resell the property at a higher value, making a profit on the transaction.

There are also opportunities to invest in home flipping companies. Instead of flipping the home yourself, you invest with a company flipping homes and make a part of the profit on the resale.

As you can see, there are multiple ways to create wealth by investing in the real estate market. If you’re interested in putting your money to work in real estate, let’s talk. I’ve been in the industry for over [ ] years and can steer you in the right direction!

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