Dear Happy Investor, real estate investing is one of the best long-term strategies to achieve financial independence. It is not the quickest, but it surely is one of the most certain. In this article, we will discuss in-depth how to get rich with real estate. You will learn about 5 proven strategies. Each strategy is different. Some are time-consuming, while others are passive but do require more patience.
While reading this article about how to get rich in real estate, please keep in mind that diversification is crucial. Don’t invest all your money in real estate, unless you are a god at it. I always recommend building a diversified portfolio with among others stocks, real estate, ETFs, and alternatives.
Ready? Let us begin!
How to Get Rich with Real Estate: do the work yourself
- Buy and Sell Real Estate in the short term
- Buy, renovate and sell dilapidated or old property (or build one yourself)
- Buy properties, find tenants and rent out for cashflow
How to Get Rich with Real Estate: let others work for you
Conclusion about How to Get Rich with Real Estate
How to Get Rich with Real Estate: do the work yourself
Simply put, there are two ways for getting rich with real estate. The first way is by passive investing in real estate funds. And the other way is to do all the work yourself. Both ways are forms of investing money, and both have their advantages and disadvantages. Personally, I am in slight favor of passive investing in real estate, although it is true that you get rich with real estate faster if you do the work yourself.
Passive investing in real estate results in a lower yearly return of approximately 5 – 9% in comparison to do it yourself. However, it is also less risky and time-consuming. It requires no knowledge as well, making it a perfect investment for investing newbies.
If you have more money and knowledge, it is reasonable to do the work yourself and get a higher yearly return. Another major benefit is that you acquire ownership of assets that bring in cash flow, if you buy/build a house yourself.
Let’s first look at how to get rich with real estate by buying or building houses and apartments. Because here you have three options, namely:
- Buy real estate and resell it within a short time frame
- Buy and renovate dilapidated houses, or build one yourself
- Buy properties, find tenants and rent out for cash flow
Think about these options. How would you approach them?
Read here the basics of how to start with real estate investing.
1. Buy and Sell Real Estate in the short term
An advanced way of getting rich with real estate is to buy up and resell properties, houses, and apartments. This can be done for commercial properties such as a small warehouse for small business owners, and for private houses and apartments as well.
Although this is a good way to get rich with real estate, there is also a downside. To successfully buy and resell real estate, you will need to have a lot of (market) knowledge and skills. It is also a more time-consuming activity because you need to look closely at market deals or even off-market deals in search of bargains.
Another necessary quality is by being very well informed about the housing market. You need a long-term strategy where you follow the housing market for years. The best way to get rich in real estate is to buy houses and apartments in low economic times. This means when the economy is doing badly.
Buy real estate just when the economy is starting to pick up. Take for example the housing crisis of 2009. Obviously a rare outlier. But the fact is that after a recession or even economic crisis, there is always a way up. This approach will take years, but if you prepare it well then you can earn a lot of money. The downside is that you wait too long and miss all great opportunities.
A final tip is to look at online auctions for real estate. It sometimes happens that people can’t pay for their house anymore. They are forced to put their house up for auction, so you can buy a good house for a bargain price. That is if you feel (emotionally) comfortable buying houses from bankrupted humans.
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2. Buy, renovate and sell dilapidated or old property (or build one yourself)
Getting rich in real estate by buying and selling houses is not that simple. It requires good insight into the housing market and you also need to be able to determine what the value of a house is. Moreover, there is a lot of hassle involved in buying and selling houses. This is no different from this second method of getting rich with real estate.
We are talking about buying up old or dilapidated real estate. Think of a ruin that has been empty for years. You buy the ruin, you renovate it and then you sell it for a big profit. They call this method Flip- a-House. It involves buying a house that looks neglected, but which is fairly easy to fix up. Then you can resell it for a nice profit.
My best advice for getting rich with the Flip-a-House tactic is location. Real estate is all about location. Do you know a particular trendy neighborhood where they are building new houses, schools, and businesses? Or better yet, do you know the future plans for such a newly built neighborhood? In that case, you have gold in your hands.
Buy cheap houses in booming neighborhoods and renovate them. Then you can sell them with big profits (more than 50,000 dollars at least). If you can’t do it yourself you can just hire some handymen. Your profit will be less, but you also have less work to do.
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3. Buy properties, find tenants and rent out for cash flow
The above tactics to get rich with real estate are time- and effort-consuming. Luckily, there is an easier way. However, as you might already know, easy means you will get more slowly rich.
That is, if something is easy, more people will do it so there is more competition. Also, this method is much less risky. And lower risk usually means lower profit potential (not always).
The third way to get rich with real estate is to become a landlord.
Renting out real estate is a safer way to get rich slowly. There are three essentials to consider when you wish to become a landlord.
The first is that you need money for a down payment to invest in a house.
The second thing to consider is that you need to do solid preliminary research. In the preliminary research, you will need to determine the cost calculation to define your potential return on investment. A total return of 9 – 11% percent per year should be possible.
The third factor is the rental vacancy. You have to be sure that you can rent out the property as much as possible, and preferably to a friendly tenant. After all, every month that your property sits empty costs you a lot of money.
Fortunately, there is another way to get rich with real estate in a safer way and with less risk! I will explain all of it below.
How to Get Rich with Real Estate: let others work for you
The summary of the above is that you can get rich with real estate if you have a lot of knowledge and are willing to work hard(er). The advantage of this is that you will get rich on a relatively short-term of 5 – 10 years (that is short-term for me). The downside is that you will need knowledge, skills, time, and sometimes higher sums of money for down-payments.
If you don’t have all of this, you must look for another way. That is: let people work for you. This method won’t make you rich in the short term, but it does in the long term of 15 – 30 years. And there are some great advantages of this method, which involves no need for knowledge and skills. You also don’t need a lot of money upfront. And there will be less hassle because everything will be taken care of by real estate experts.
I will explain.
1. Get Rich with Real Estate Funds (steady dividend income)
When I was a totally investing newbie, I’ve started with putting my money in a non-listed real estate fund.
A non-listed real estate fund is suitable for lazy investors who have the patience to let money work for them. In Europe, there are some excellent non-listed real estate funds such as SynVest and Corum Investments. They invest in real estate worldwide or just in Europe.
As an investor, you only need to transfer your money to the non-listed real estate fund. In return, you will receive a monthly dividend. The total yearly return varies between 5 – 8,5%, depending on the chosen fund.
Let’s say that you invest a larger sum of money: 20.000 dollars. With 7% dividend, you will receive 20.000 * 0.07 = 1400 dollars every year (before taxes). Over 10 years, that’s 14.000 dollars (before taxes). And you get your initial deposit back if desired. So in 10 years, you could gain 34.000 dollars with a single investment.
The trick is to continuously invest money into non-listed real estate funds. Invest smaller amounts of money that you don’t need in the long term. And do it only with money you can afford to miss. If you continuously reinvest your dividends, you will have a significant amount of money in 10 years. And after 20 years you might never have to work again.
Another piece of advice is to diversify. Don’t put all your money in non-listed real estate funds. Also invest in alternatives, such as stocks, ETFs, P2P Lending, et cetera.
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2. Get Rich with REITs
Next to non-listed real estate funds we also have listed real estate funds. We call these REITs.
REIT stands for Real Estate Investment Trust. This is similar to a non-listed fun, apart from the difference that REITs are publicly traded. That means you can invest in REITs through an investment account.
REITs are (in most cases) riskier than investing in non-listed real estate funds. That is because they have stock volatility as well. Yet, higher risk also means potentially higher returns as compensation.
With REITs, you could get an average yearly return of 9% to 14%. Of course, you do need the right knowledge for this to avoid costly mistakes. Besides potential higher returns, a REIT is also more flexible in terms of liquidity. With real estate funds, you have to deal with exit costs if you want to get out early (within three years). With a REIT you can buy and sell much faster, without exit costs. This means that you can withdraw the money from the real estate market more quickly in worse times.
REITs can be interesting for those who want to invest more in both the short and long term in the real estate market. One reason for this may be because you want to take advantage of the real estate market cycle. This is the cycle of when things are going really well, and when things are going really bad in the real estate market. If you are very good at market timing, you can take maximum advantage by buying REITs in the dip. Most REITs can be found in America or Asia. A final tip here is to invest in REITs ETFs so you have the right diversification to reduce risk.
How to get rich with real estate
Investing in real estate makes one prosperous. It is the most favourite investment of rich people. Both in Europe and worldwide, countless people become wealthy thanks to real estate.
How do they do it? How can you also get rich with real estate?
Essentially, there are six ways, namely:
- - Buying real estate
- - Real estate funds
- - Real estate shares
- - Real Estate Investment Trust (REIT)
- - Real estate ETF
- - Crowdfunding
Any opportunity can make you rich. However, some are riskier than others. And there are specific advantages and disadvantages.
For instance, getting started with real estate funds is much easier than buying your first flat or investment property. You buy a property share quickly, but without the necessary knowledge and experience, large price losses can be suffered. And crowdfunding may be passive, but unfortunately the returns are also very low.
Our favourite is to invest in the best real estate funds.
Especially from 2023, when buying property has become more expensive, it makes more and more sense to opt for a real estate fund. With a lot of patience, you will get rich thanks to consistent investing in real estate funds.
Do you want to get rich faster, or just make a lot of money with real estate? In this case, the best option is to specialise in real estate and/or (real estate) shares. These options can potentially offer the highest average annual returns.
Roadmap: Getting rich with real estate in 7 steps
To get rich with real estate, it is important to follow a number of steps:
- - Research: Before you start investing in real estate, it is important to thoroughly research the market and the different options available. This research can include reading reports on the property market, comparing different locations and researching different property categories such as owner-occupied properties, rental properties, land or commercial properties.
- - Financing: Once you know what you want to invest in, it is important to set your budget and research how best to finance. This can be through a mortgage or mutual funds. It is important to consider your financial situation and goals when making this decision.
- - Location: A suitable location is crucial to the value and success of your investment. Consider factors such as the economy, infrastructure, future value expectations and the demand for property in this particular location.
- - Rental income: If you decide to rent out property, it is important to set a competitive rent and select a good tenant. This will help in getting consistent income from your investment property.
- - Maintenance and improvement: Maintaining property in good condition and considering improvements are important to increase its value. This can be done, for instance, through renovations or improvements to the exterior of the property.
- - Diversification: It is advisable to invest in different types of properties and locations to diversify risk. This means not only different types of property, such as owner-occupied houses and commercial properties, but also different locations in different regions.
- - Professionalism: Working with real estate professionals, such as brokers, accountant and legal advisers, is important to manage and protect your investments. They can help you make wise decisions and manage any challenges that may arise.
By following these steps and being patient, you can get rich with investment properties. However, keep in mind that real estate investing carries risks and it is important to consider them carefully before you start investing.
Why any beginner can get rich with real estate
Getting rich with real estate is actually quite simple. THE crucial conditions for beginners is to start as early as possible AND have a lot of patience. This means consistently investing in real estate to create wealth.
We get rich with real estate simply by owning several properties, and generating rental income from them.
Suppose you can save 10,000 euros every year. Buying the first property is possible after about 5 years of saving. From this moment on, you will receive rental income. For example, 200 euros net per month. Or: 2,500 euros per year. After 5 years, you buy a second property. The rental income increases to 5,000 euros per year. Together with the savings, you can now save 15,000 euros every year, enabling you to buy a third property within 3 years. Soon you will be able to buy one property per year.
Repeat this process, and after 20 years you will have several properties. As a result, monthly cash flow can reach 5,000+ euros per month. And that's not even counting potential capital gains (selling a property with excess value). Moreover, you own many properties. When selling, even without a surplus value, you will receive money simply by the difference between the selling price and the remaining mortgage.
Do you want to get rich quick? In this case, you need to take more risk. Knowledge and experience are necessary for this, like finding the "best way" to get richer.
Tip: download our free real estate tools for calculating returns and more.
What is the best way to get rich with real estate
There is no specific "best way" for getting rich with real estate. There are many factors that make an impact. Consider the (macro) economy, the property location, your risk tolerance, your personal goals and your knowledge and experience. All these factors have on the outcome.
So what is the best way for getting rich with real estate?
Well now, there are some tried and tested strategies and principles that do help us increase our chances of getting more wealth:
- - Select only valuable locations: Invest in real estate in attractive locations that have a high value expectation. This increases the chances of capital appreciation, and hence higher returns on real estate. Location is super important. It can be anything: an emerging residential area, a thriving city, or a popular resort that is developing.
- - Focus on cash flow: Try to find properties with consistent rental income that exceeds operating costs, such as mortgage payments, insurance and maintenance costs. This means that the best property investments are not always those with the highest risk profile.
- - Learn from real estate experts: Consult with real estate investors, brokers, and financial advisers who have experience in real estate investing. It is important to gather the right information and advice before making decisions.
- - Spread risk: It is advisable to invest in different types of properties and locations, rather than putting all your money in one investment. This way, you reduce the risk of loss in the long run.
- - Pay attention to mortgage debt: try not to grow too fast! Getting rich with real estate is a marathon, not a sprint. Those who grow too fast will take on too many properties. This significantly increases the risk, with even potential bankruptcy or worse.
- - Be patient: Gaining wealth with real estate is a long-term process and requires patience and perseverance. It is important to have realistic expectations and keep investing and diversifying.
Do you have a best way? What is your tried and tested strategy for amassing wealth with real estate? Share your tips and insights with us in a comment at the bottom of this article.
Divide and conquer: acquire wealth with real estate thanks to risk diversification
A very big downside to real estate is that it can lead to personal bankruptcy. If you take on too much debt, this can lead to serious financial problems when vacant. In the worst case, you have to keep borrowing money until you go bankrupt. A lifetime of debt restructuring and emotional problems will follow.
Our tip: real estate can make you rich, but be very mindful of the risks!
There are several ways to spread risk:
- - Different property types: Consider investing in different property types, such as residential, commercial, and apartment complexes. This can reduce risk, as different types of property tend to be more sensitive to different economic conditions.
- - Different locations: It is also advisable to invest in different locations, both inside and outside your current residence. This reduces the risk of being dependent on one specific economy or property market.
- - Different forms of investment: Also consider investing in real estate in different ways, such as direct ownership, real estate investment trusts (REITs) or through crowdfunding. This allows you to incorporate different types of risks and returns within your investment portfolio.
- - Diversification of income sources: Try to find properties that offer different income sources, such as leasing both residential and retail spaces within the same complex. This reduces the risk of being dependent on one income source. Be creative in this: put up a paid washer and dryer. Offer cleaning services. Think about how to get the most out of every square metre while helping your tenants.
- - Mortgage loan: you can also spread risk by taking out several mortgage loans from different providers.
Don't forget the taxman! About taxes when investing in real estate
Getting sleepily rich and receiving cash flow every month is something everyone wants, of course. However, we live in the West and the rich have to contribute more financially. This means: taxes. Lots of taxes. Of course, there are tax benefits to be had.
Taxes related to real estate can vary, depending on where the property is located and how you own it. Here are some common taxes on property:
- - Income tax: you have to pay income tax on all rental income. If you are doing this on a business basis, you will pay the usual profit tax.
- - Property tax: Many places require an annual property tax on property, based on the value of the property.
- - Purchase tax: When buying property, we pay transfer tax
- - Sales tax: When selling property, we sometimes have to pay sales tax. There are also rules for excess value on a sold property.
- - Repair and maintenance costs: Some property repair and maintenance costs can be offset as deductible expenses on your tax return.
It is wise to be aware of the tax rules. Dare to invest in advice from a tax expert or accountant. They will advise how you can gain tax benefits, and how to pay tax correctly. In short, don't forget the taxman!
Good preparation is half the battle
Getting rich with real estate requires good preparation. These are good steps and tips to best prepare for your long journey to financial wealth:
- - Education: Before you start investing in real estate, it is important to learn as much as you can about the real estate market and how to invest in it. This is especially true with listed assets, such as stocks and REITs. In this case, you can learn from experts like the Weekly Insider.
- - Financial planning: Define your financial goals and determine how much you can invest. Consider building an emergency fund and reducing debt before you start real estate investing.
- - Research: conduct thorough research on each potential investment and how it fits your risk profile.
- - Monitor and adjust: After purchase, continue to monitor the performance of the property investment and adjust where necessary. Make sure you stay on track to achieve your financial goals.
- - Discuss with your partner: do you have a wife or husband? Involve her in your plans to get rich with real estate. Especially when you have financial connection, such as in registered partnership, it is important to discuss your plans at length with your husband or wife. Do it together, it's more fun too.
Conclusion about How to Get Rich with Real Estate
We have basically looked at two different ways on how to get rich with real estate. In one method, we do all the work ourselves. This involves going into the housing market and look for gems that we can buy, fix, and resell or rent out. This requires time, energy, knowledge, and, in most cases, a lot of start-up capital. Conversely, the advantage is that you can make bigger profits. If you have knowledge of the housing market, and you have a lot of money, this might be the best way for you.
Another way to get rich with real estate is by investing in (non-listed) real estate funds. This is one of the best options for investing with less risk. Unlike above, with real estate investing you will spend little time and energy. Also, you need less knowledge of the real estate market and you can start with as much as 100 dollars per month.
In short, this way of getting rich with real estate is much more accessible for most of us. It also involves less risk and work. Conversely, a disadvantage is that you will need more patience and time to get rich with real estate.
If you are not willing to work and learn then you should go for non-listed real estate funds. However, if you are eager to learn and work hard, you could get more profits by investing in REITs or buying real estate properties to sell or rent out.
