Top three benefits of investing in real estate

This article was provided by RCN Capital

by Nate Zielinski

There are countless benefits when it comes to investing in real estate. These days it seems that everyone knows someone that currently invests in real estate or is beginning to find education and resources that will help them break through into the industry. This is not a trend, but rather a realization that investing in real estate is a beneficial venture that anyone can get into and thrive. Investing in real estate offers investors numerous opportunities including passive income and building out a solid network real of estate professionals that allow for sustainability and longevity in the industry. Let’s dive into some of the top reasons why investing in real estate is so advantageous.

Passive income

The most enticing benefit of investing in real estate is easily the passive income that can come along with it. Passive income can come in two ways, but the most common is through long-term rental income. When investors find a property in rent-ready condition and find a tenant, they can start to accrue passive income. With just one property that income stream can be slow, but the goal of any investor is to keep going, keep securing properties and stacking that income. With 5, 10, or even 15 properties in their portfolio, an investor’s passive income turns into generational wealth which is the ultimate goal for anyone that enters the industry.

At that level, the best strategy for investors may be to pivot to multifamily properties. Instead of 15 units spread across a state or country, investors begin to look for multifamily properties that can reach 20 units or more. It’s the same idea as passive income but becomes much easier to manage.

The second way is a fix and flip property where the paycheck comes a lot quicker but only comes once as opposed to the rental income that is collected every month. However, if an investor secures a property and hires a general contractor to complete the work and renovate the home, that’s still a passive source of income where the investor isn’t putting in as much work but still getting paid handsomely depending on how in-depth the renovations are. These passive income strategies are appealing for investors and allow them to prioritize investing as their full-time job. This pivot from a traditional 9-5 job to investing full time is any investor’s dream especially when it comes with passive income streams from multiple units or properties.

Numerous paths to success in the industry

Another intriguing benefit of investing in real estate is the road map to success. There are many avenues and different paths that investors can take, and no two investor stories or careers are alike. The business is truly unique and of those business opportunities where there is no limit on success and an investor can take it as far as they want to.

One of the most common paths, made famous by numerous TV shows, is the fix and flip model. Many new investors see this path as a viable option to break into the real estate investment space and thoroughly enjoy it. The fix and flip process is preferred due to the quick nature of the turnaround as well as the ability to be creative throughout the process. Fix and flips are a general contractor’s and interior designer’s dream. If an investor already has these tools in their arsenal, they are well-equipped to succeed with the fix and flip model. Investors look to get these homes done in 4-6 months and can sell the home for a hefty profit before moving on to their next project.

The next popular strategy with investors is the long-term rental strategy. A slower, more gradual plan in the investment industry, but still very effective. As a landlord, investors can find properties that are ready to go and can start earning rental income as soon as they find a tenant. This strategy is more scalable and much less intensive than their hands-on rehab work. Investors that don’t want to deal with rehab costs and manual labor typically favor the long-term rental strategy. With a number of units in their portfolio, the long-term rental stream can be lucrative if patience is displayed.

Lenders all over the country are looking to tailor their loan programs to investors’ needs. Always talk with your local or preferred lender to see what they have to offer. Programs such as ground-up construction, short-term vacation rentals (AirBnB), and multifamily loan programs are usually all available depending on what route investors want to take. Fix and flips and long-term rentals are certainly the most popular, but not the only way to achieve success.

Building a reliable network

For an investor, one of the most impactful benefits is making connections in the industry. Being able to build out a network before, during, and after the investment process is vital to sustaining success. There are a number of other professions within the investment space that investors can rely on to help them thrive in the industry.

The first contact that any investor would want to meet is a local realtor or real estate agent in the market they are interested in. For investors, having a working relationship with a realtor can be so beneficial. They’ll be able to alert investors when houses are going on the market and act as a valuable lead source. An investor that can get their eyes on a property first and put a bid in is one that is putting themselves in a position to succeed. Realtors also have a contact list of potential renters and buyers. Investors with long-term rentals or fix and flip properties can leverage these realtors’ contacts to fill their properties at a much faster rate.

Speaking of fix and flips, a general contractor should be the next relationship that an investor seeks out. Once investors secure a property, finishing the renovation projects in a timely and cost-efficient manner is a must. With general contractors, investors have workers ready to go that want to get the job done and get paid. If they are aware of an investor’s strategy and wants and needs, they can set up their schedule to match that of an investor’s. If they’re guaranteed work throughout the course of the year, they’ll be very amenable to an investor’s needs and prioritize their jobs over anything else.

Investors should also be looking to have relationships with brokers in the industry. A broker can handle all the aspects from a loan standpoint while investors are searching for new properties or handling jobs at properties that they currently own. A broker will charge a fee, but just like general contractors, if a broker is aware that they’ll get a steady stream of business from an investor they’ll likely reduce fees and lighten the load on an investor for the trade off of repeat business. It’s a broker’s job to study lender’s guidelines and processes and make the life of an investor much easier when it comes to securing a loan. A relationship directly with lenders is also an option, but brokers are able to handle a great deal of work that the investor will be happy to pass off.

The final piece of the network puzzle is investors being able to find a mentor. When just getting started in the industry, investors can be easily overwhelmed with the pressure and competition that can exist in the industry. Having a mentor that can ease those anxieties or help as a partner to fund some of the first few deals is massive for investors. Mentors can also help educate investors on market trends and potential areas of success. It is a prudent idea for investors to find a mentor in the industry before they even start looking for properties to invest in.

Get started on your investment journey

The benefits of investing in real estate clearly outweigh any negative thoughts or expectations that an investor may have. There are opportunities across the country to start earning that passive income and begin the journey to generational wealth. With a network behind them, any investor can be armed with the tools to succeed at all stages of the investment process and produce results for years to come. Find a mentor, a property, and a trusted network of people looking to accomplish the same goal and an investor can be unstoppable.

Copyright Bloomberg News

Nate Zielinski, business development coordinator, joined RCN Capital in the Fall of 2020. He adds his ambition, communication skills, teamwork, and public speaking ability to RCN’s business development team. Nate’s goal as a member of the business development team will be to recruit new, long-lasting business relationships with brokers and borrowers as well as maintain the strong relationships RCN Capital already has in place. Nate’s prior work experience includes sales, advertisement, copywriting, and social media. Nate graduated from the University of Connecticut in 2015 with a Journalism degree and a related area of study in Communications while working for the school newspaper and radio station.