Many people want to get into the real estate market to build wealth. However, getting started in real estate is not always easy. There are many different types of properties and each has its own advantages and disadvantages. Also, new laws, trends and opportunities are constantly entering the market, so it can be hard to keep track of them all. In this article we give an introduction to wealth building with real estate. We explain, we tell you the advantages. We also address the risks and opportunities of real estate investing and provide tips for a successful start in the industry.
The advantages of real estate as an investment
Many people believe that real estate is a worthwhile capital investment. The reasons for this are manifold. First, real estate offers a high rate of return, as rental income usually covers the costs of financing, maintenance and management. In addition, the demand for housing in most major cities remains high, so property owners usually have no problem renting out their apartments or houses.
Credit leverage: nowhere is it easier to get credit than in real estate finance. This is a major advantage of real estate, as it is usually financed with a loan. Credit leverage allows you to multiply your equity, increasing your return on investment.
Risks when building wealth with real estate
There are some risks to consider when building wealth with real estate. First, there is the general economic risk. The economy can change and so can the demand for real estate. This means that real estate prices can fall and you have invested your money in something that is worth less than before. Who then has to sell quickly, usually has a large mountain of debt due to the taxes on the real estate purchase.
In addition, real estate is also prone to vacancies. When the economy is bad, businesses can go out of business and tenants can move out. This means that you may not have rental income for a long time and thus reduce your cash flow.
The maintenance costs of a property can also be a risk. If you don't invest enough money in maintenance, the property can become overgrown and lose value over time.
Interest rate risk: Most people working in the real estate industry have heard about interest rate risk. Many consider it a myth, or at least something that rarely happens. However, the risk is real, as you can currently see. With rising interest rates, a sudden increase in mortgage payments can threaten your very existence. If you have bought badly now or have a short financing term, you can get into trouble
This is how successful asset accumulation with real estate works
Many people dream of buying their own house or apartment at some point in the future. But few know that real estate is also an excellent way to build your wealth in the long term.
The first question to ask is what is the goal of wealth accumulation?. Because depending on what you want to achieve, the strategy of construction is also different. Do you only want to achieve a return on investment or increase the value of the property through renovation and then sell it?? Or both?
Another important question is about the risks. Because even when building wealth with real estate there is always a certain risk. For example, the property may lose value or the rental income may not materialize. Therefore, it is important to inform yourself in advance and to weigh the risk.
Self-interest is like the piggy bank – but it also has risks
The basic idea of home ownership is simple: you buy something (z.B. a property) to use it yourself (z.B. as an apartment) and thus save money (rent). At first sight this seems to be a very reasonable strategy, but there are also some disadvantages to be aware of.
For example, you are very limited in the choice of real estate, because you want to live in the apartment yourself and therefore must meet certain criteria (z.B. location, size etc.).
Is the job really that safe? Or maybe in a few years I will have to chase after the job? Plan to have children and then the apartment is too small?