Studying the world’s wealthiest people and how they made their money will show you that there are many ways to become rich. One thing many of them have in common, however, is that after they made their money, they invest it in real estate.
It is reasonable to expect properties to increase in value over time. There are two general ways to invest in real estate and it would be good to learn about each one. You can use both strategies with most properties you’ll purchase.
Capital Gains in Real Estate
Say you bought a dilapidated house that you intend to fix up and sell as soon as you can or a vacant lot that you expect will rise in value as the years go by. These are both samples of investing for capital gains. Note that for capital gains, you make your profit when you buy, not when you sell. If you purchase at low enough prices, even if you sell below the market value, you should still be able to see some profit.
Cash Flow in Real Estate
To invest for cash flow, you purchase a property with the intention to generate rental income. This can include house rental in Japan or in the countryside, for instance. You can also consider creating office spaces for lease. Ideally, these properties should produce regular monthly income. Note, too, that this income should match or exceed the expenses associated with owning it, like mortgage and property taxes.
Balancing Cash Flow and Capital Gains
These two strategies are not mutually exclusive. While waiting for your property to appreciate in value, you can rent it out so that it can pay for itself. Similarly, with your rental property, you can improve it with the intent to sell it later on. Using a combination of both methods can synergize and allow you to build your wealth faster.
Above all these, don’t forget to consult experts in these fields and learn from them before you get started. You may not avoid all mistakes, but you can, at least, avoid the most common ones new investors make.