Real estate has long been one of the most popular investment vehicles. Many investment moguls have touted their successes in the real estate market, boasting millions–if not more–in profits. However, real estate investing is not an easy business to get into. It takes time to learn the ins and outs of the business, and it takes a significant amount of money to get started. It’s here where most people hit their first, and often most formidable, obstacle: how do you save enough money to begin real estate investing? At Flip Out Academy, we have heard you and would like to provide these tips on how to start saving now.
What is Real Estate Investing?
Real estate investing is a broad category that includes operating, investing, and profiting off of activities that are centered on tangible property. There are four main ways of making money from investing in real estate.
Real Estate Appreciation
When real estate increases in value, it is said to appreciate. Appreciation usually occurs when demand for property in the area rises, and the principle involves buying a piece of real estate for one price and then selling it for a higher price later. If you’ve ever heard of house-flipping, then you’re familiar with real estate appreciation.
Investing in real estate doesn’t have to include selling something. You can buy a home, commercial building, or a piece of land, and rent it out to private citizens or companies and thereby create incoming cash from the monthly rent that they pay.
Real Estate Related Income
This income is generated by property management companies, real estate agents, and others, who receive a commission through buying, selling, or maintaining a piece of real estate.
Ancillary Real Estate Investment Income
It’s possible to make money via someone else’s real estate through ancillary investments. You know the vending machines you see in office buildings or outside of stores? Somebody owns those. Coin-operated laundry facilities within apartment buildings? Somebody owns those, too, and they’re netting a tidy profit.
What are the Benefits of Real Estate Investing?
Why choose real estate investing over other investment opportunities? Real estate provides a steady income, while stocks, bonds, or other business ventures can be highly volatile. You can also enjoy tax benefits that other forms of investing are not eligible for. While the real estate market fluctuates, the general trend is always upward. Your investment will appreciate over time, and you’ll be able to profit off of this through either renting the property or selling the property at a higher price than you bought it for
How to Get Started
1. Prioritize Saving Money Over Spending it
The very first step is to choose to make saving money a priority. Go through your monthly income vs. expenditures and see where you can minimize your expenses. The changes can be simple, such as only buying what’s on sale when you go grocery shopping, or they can be major, such as driving a more economical vehicle. Either way, the money you’re not spending should go directly into the bank.
2. Make Lifestyle Changes
Do you really need to spend $5 on coffee every morning when brewing a cup or two at home will suffice? How often do you eat out, and how can you minimize the frequency of doing so while still maintaining a life that you enjoy? Some of these changes will be easy; others may not. As you make them, it’s important to keep your eyes on the end goal: real estate investing.
3. Move Money from Your Checking Account to Your Savings
It’s a known fact that having money makes you want to spend it. The more you have in your checking account, the one you use to buy things, the more likely you’ll be to spend it. Don’t save money in your checking account. Instead, once or twice a month, move money you know you won’t need from your checking to your savings account–and leave it there!
4. Increase Your Monthly Income
This tip is not for everyone; whether it’s possible or not will depend a lot on whether one has the time or the ability to increase their income. That being said, there are a lot of options out there that can help you bring in a little more money without too much of a time investment on your part. If you have the ability, a part-time job can help to increase your savings quickly. There are also a myriad of opportunities online to make a little quick cash.
5. Automate Your Savings
One way that can make putting money aside much easier is to automate deposits into your savings account. This can work especially well for those who are paid via direct deposit, as you’ll never have to worry about going to the bank and having to make the transactions yourself. Start by determining what percent of your monthly income you can live without. Don’t be discouraged if it’s a small amount–every bit helps. Then, set it up with your bank so that when your paycheck is deposited, a certain percent is automatically put into your savings.
6. Get a Roommate or Rent A Room
One of your biggest monthly expenses is probably your rent, and living with a roommate will significantly reduce it. If you’re single and living on your own, start by talking with friends or family and see if anyone is interested in becoming roommates already. If you happen to have a multi-bedroom home, think about renting out one of the rooms.
One of the most critical steps in real estate investing is to secure the money to make your initial investment. It’s the key that opens the door to your financial future and needs to be taken seriously. Going forward, the experience you gain in learning how to save money will only help you in the long run, by giving you the tools to live below your means and continue to save and invest. The implementation of these tips and your will to succeed at real estate investing will secure your financial future and help you achieve the life of which you’ve always dreamed.