Expert investors like John Foresi of Venterra Realty have always known the value of real estate property. Investing in the real estate market is harnessing the largest expense that most of us budget for every month, as housing makes up an average of 33% of our liquid cash monthly outgoings.
It is entirely possible to translate this cash flow into a bottom-line profit.
The two ‘lanes’ of property investments.
Real estate has traditionally fallen within two primary categories: the flipping market and the rental marketplace. Buying property departs from the stock market in a big way as most investors are actually borrowers, and are profiting off of a bank’s financial resources. This is what separates investing in the home as a vigorous alternative investment opportunity, and sets it apart from other asset classes. It offers the opportunity to leverage yourself as an investor in order to create the potential for massive wealth gains. Borrowers will act as collateral bargainers seeking to promise punctual repayment or the transfer of possessions in the event of a contractual breach. Alternatively, many buyers looking to purchase a family home rather than an investment property, seek to offer their great credit score as proof of the ability to repay the debt, and secure financing this way.
Buying a property to flip means putting in a great deal of work on the home; either financially or physically in order to increase the value of the property and generate profit as a result. Many flippers purchase foreclosure homes that are sold at a loss by the bank. These are houses that were defaulted on, leading the bank to repossess them and attempt to move them off their books as quickly as possible, in order to mitigate running losses. However, even a house in foreclosure requires renovations. In order to maximize profits, a new owner will have to actively work to increase the value before selling the property on and targeting a new structure for profit-making.
Walk the path of passive income instead.
Home flippers must invest considerable time and energy into the process. This can quickly become a full-time job that requires exceptional dedication. Instead, take a page from the book of professional real estate investors. Passive income generation is entirely possible within this asset class, and launching your first property is easier than you might think. Borrowing against your asset holdings, or with the help of your credit score will give you the collateral you need to put in an offer on a home. With rent costs on a consistent upward trajectory across the country, it’s likely that your first tenants’ rent payments will come close, or cover, the entire sum of your monthly mortgage repayment obligation. This means that a few years of self-managed rental ownership can significantly cut into the overall mortgage debt you carry on the property.
The true power of rental property is in the inflation of rent prices alongside a mostly stagnant operating cost. Your mortgage payments are stationary, but the good news is that your income generation is not. Hiring a property manager like Foresi’s Venterra Realty, which charges a straight percentage or an alternatively calculated low management fee, can create a truly passive income stream that both pays down your mortgage automatically and steadily increases in annualized returns yearly.
Other investors are infusing their capital into a real estate investment trust, (REIT) or other mutual funds like those on Yieldstreet’s investment platform. Yieldstreet investors gain access to professionally managed rental buildings and can participate in these investment opportunities in the same way one might buy into a fund listed on the stock market (check out a Yieldstreet review for more on annualized returns with these alternative investment funds). Yieldstreet offers commodities with generally low correlation to the stock movement, however, giving you more diversified holdings without the hours of research required to rebalance in this way yourself.
Creating passive income in real estate is truly achievable, allowing you to watch your savings grow while focusing your attention on the things that matter the most to you, instead of on your wallet.
