Everyone dreams about it. From the time they are young they dream of a home that is their own, inside which they are master and the ultimate say in any decisions that are made. These are the moments in which their future will be decided and they will finally be free of outside influence. Of course, for many young adults this is a dream that will not come to be for quite some time; they will live with their parents while they finish their schooling, then step out of the comfort of that home into their first small apartment, after which they will almost inevitably bounce from apartment to apartment until they decide that it is time to settle down and start a family, at which point they will finally find that single home they have been dreaming of.
For some individuals, however, that single home isn’t what their dreams are made of. Their dreams consist of apartment buildings with plenty of people, the more the merrier. They look at single family homes with a kind of tolerant disgust in their eyes, a necessary evil to get them started on their path to the multi-family homes their fantasies are made of.
Who are these unique individuals who dare to turn against the conventions of society and live their lives backwards? Real estate investors of course! Real estate is one of the fastest growing markets in the world, and it seems as though everyone wants to get a piece of the pie; however, in order to turn that piece into a whole pie and enjoy the maximum amount of income that real estate is capable of generating it is first necessary for them to learn the rules of the game.
The first rule in real estate is to buy low and sell high. What does that mean? It means that when an investor is looking for a property they should keep their eyes on the ones that need a bit of work and are therefore going to be sold for a price below market value. The investor can then use their resources to rehabilitate the property and raise its value, where they can resell the property for its full market value and pocket the proceeds.
Of course, this is what investors do with those single family homes that they use to get them started. The second rule of the business is that true wealth in real estate comes not from the rehabilitation and resale of homes but from the generation of passive income. Passive income is money earned without having to work for it. Is this really possible? Absolutely; however, the secret to doing so is to look away from those single family properties and focus on multi-family rentals.
When an investor purchases a multi-family home and rehabilitates it they are opening the doors to take in tenants. These tenants will then pay often exorbitant rents in order to live in their apartments. These rents will arrive every month and can be used to pay all of the expenses on a property (assuming, of course, that the investor has done their homework properly) as well as providing a comfortable income for the investor in question.
The largest expense to owning a property is the payment of a mortgage. Once that mortgage has been paid the building will belong to the investor and all of the rent checks that come in every month will become spendable income, all generated from their original investment. It is through the accumulation of this passive income that real estate professionals are able to reap the fruits of their labors.
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