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There are so many ways to make money in today's market. Many innovative start-ups have had extraordinary success in recent years, together with the YouTubers phenomenon and the so-called influencers. However, over the decades, real estate remains the most consolidated street and where the richest people have earned and continue to earn huge sums of money. In an article, I found an interesting fact: most of the personal wealth owned by the wealthiest American taxpayers is made up of real estate.
I stopped to think, but why is real estate investing the one that never goes out of style and has worked for decades? So I wrote a list of the advantages that this type of investment has even when comparing it to more traditional businesses.
The 11 advantages of becoming a real estate investor.
The world of investments in real estate does not discriminate according to age or nationality. Buying a house is within everyone's reach and you are neither too young nor too old to start, you just need to be 18 years old.
There are many investment methods in addition to real estate: stock exchanges, cryptocurrencies, stocks, forex, etc. These are all ways of investing that have produced a lot of money. You will have read the latest news on cryptocurrencies that have reached extraordinary currencies in recent times and you will have also read about people who became millionaires for buying a few bitcoins a few years ago. I do not know of any other investments except real estate and for now, I have not studied any of them. And precisely because I have not deepened and studied any of them, I have never invested even one euro. In my opinion, these forms of investment have a big difference compared to classic real estate investment: they are based on virtual money. That is, you buy something but you do not see it, it is something that does not exist except in graphs and numbers that you see on your smartphone or pc, or other platforms. The housing business, on the other hand, is based on solid, real, tangible assets, which you can see several times and touch with your hand. Furthermore, it is a business based on the primary asset by exception, everyone needs a roof to live in, therefore it is not a question of investments in novelties that can end up in a soap bubble.
Real estate investing can give you a steady income which is called cash flow in American jargon. To give an example, you can buy a house using a mortgage, rent the house and receive a rent that goes to cover the mortgage payment, the surplus, or how much you put in your pocket after the mortgage payment and the various management costs are removed. your cashflow. This is one of the ways to generate steady income.
This is one of the sides that I find extraordinary in this business, which is not trading time for money. What's your current job? Have you ever noticed that you are exchanging your time for the money you put in your pocket and that if you stop for a month, for example, you don't earn? This is called by Robert Kiyosaki "the hamster wheel". We do not realize that with employment or self-employed work we are in this trap. With real estate investments, I have learned to make money work for me and in my opinion, the goal of every investor must be to produce automatic income that allows you to live your own lifestyle and work for passion and not for“duty".
Well yes, even if we are in Italy and you will think: in Italy, which is the country with one of the highest tax rates in the world, are you coming to talk to me about tax advantages? Yes. You read that right, in real estate, it is possible to pay few taxes, especially at the beginning when you operate as a natural person. One of the reasons, to give you an example, is that the tax calculations for the purchase of a house are made on the basis of cadastral rents which are relatively low compared to the market value of the property. Another example is the 20% rate applied when you buy a second home and resell it within 5 years. Do you know of another business or activity that pays a fixed 20% tax? The no. In addition, tax concessions have been introduced for several years for those who renovate their homes, so there is the possibility of deducting the renovation costs from taxes.
72.9% of Americans own homes. The concept of owning a home in Italy is very important. Surely you have noticed it too, looking around your acquaintances and friends, don't you see a real rush to buy a house? Owning a house and getting into debt to buy it is innate in Italian culture.
It is clear that for a real estate investor choosing to work in a country where the rate of home buyers is so high is much easier and more profitable.
When you buy a house using a mortgage you are using leverage, what Americans call "Leverage". The people and companies in the world who control most of the money such as banks, loan companies, insurance funds, and investment funds want to lend you money because it is their earnings. Why not exploit the banks for the benefit of investment in real estate? Let me explain the leverage effect with an example: if you buy a house for $ 100,000 using a mortgage, anticipating $ 10,000 of your money, it means that you are using financial leverage to own $ 100,000 of assets with only $ 10,000 of your pocket. The leverage effect then becomes more and more powerful if you are good at evaluating the purchase of your home and you have bought at a strong discount. This means that if you resell the house for $ 150,000, with only $ 10,000 in advance, you have brought home $ 150,000 of assets and you find yourself a new sum to invest for a new property. All with a small advance of $ 10,000!
As you may have already guessed in the explanation of the "Leverage" effect, you don't need a lot of capital to start investing in real estate, unlike what people believe. Of course, if you already have a nest egg aside, it's certainly easier to get started. But I will bring you again the example of the mortgage, if you have the possibility to apply for a mortgage and you do not do it to buy a house to live in, you can take advantage of the money of others (in this case the bank) to start with your own first investment. Why did I say zero capital? Because again to give you an example, there are banks (very few today) that even finance 100% of the purchase of a property so you can take advantage of the financial leverage to finance 100% of your investment.
Is there a need for a crisis in the real estate market to invest? No. The real estate investor can earn in crisis markets and in markets with an upward trend. The important thing is to use the right techniques to know how to move in both cases. The golden rule to work well whatever the historical moment of your city is only one: the deal is made when you buy and not when you sell. So this is the rule that you must always follow, in whatever market you are in.
Becoming a real estate investor does not require a warehouse as with many businesses or the rental of an office to begin with. All you need is a laptop and a great desire to get busy! I always recommend starting part-time and not quitting your main job, start studying the real estate market in the area where you live. It is clear that if you live in a village where the real estate market is almost non-existent, I highly recommend that you study real estate in the first nearest city of at least 40 / 50,000 inhabitants.
It is what I think is most important and I kept it at the end so you can keep it in mind. Real estate can make you rich and give you the life you've always wanted, you can get out of the famous hamster wheel, which is the wheel where the employee or self-employed person runs every month, the wheel where the company tells us to run and then not never have the time to enjoy our life, to stop and enjoy a day in the middle of the week where we can be together with our family without the guilt of having to work at all costs to make it to the end of the month. Real estate can give you the freedom to stop and live your passions without feeling guilty and without having to catch them on a lunch break in a hurry between one engagement and another. I have met people who have created enormous wealth with real estate and people who have simply created a monthly income added to their salary, you have to decide what makes you happy and what your long-term goal is.
