Gain an understanding of real estate investing, and learn how to invest in real estate properties for as little as $500.
If you’re hoping to create a passive stream of income that allows you to build wealth while doing whatever you please with your time, you’ll want to read this article.
By the time you finish this article, you’ll understand why wealthy people invest in real estate.
What Is Real Estate Investing?
When you buy a property for the purpose of renting it out to someone, instead of living in it, that’s real estate investing.
The idea behind real estate investing is simple: you rent out your property to other people, and your tenants pay you a rental fee each month.
This creates a steady stream of income that doesn’t require a lot of your time or attention.
When you invest well, it leaves you free to do as you please with your time. You might spend your days searching for new investments, running a business, or traveling the world – it’s up to you!
Here’s what real estate investing is not:
- When you buy a home and live in it, then resell it a couple of years later – that’s not real estate investing.
- When you flip houses for profit (buy a property, fix it up, and resell it for profit), that’s not real estate investing.
Reselling and flipping (real estate trading) are active business transactions that require your involvement.
An investment, on the other hand, puts passive money back into your bank account.
Artwork: An investment puts passive money back into your bank account.
There are several types of properties you can invest in, including:
- Single-family homes
- Shopping plazas
- Mobile home parks
- Office buildings
- Retail spaces
If you’re interested in creating passive income, real estate investing can be an excellent way to build wealth for the future without requiring you to put in a lot of hours earning it.
The 4 Advantages of Real Estate Investing
At Minority Mindset, we frequently talk about building wealth over time through passive investing.
Stock market investing provides an excellent way to build wealth over your lifetime. Real estate investing, however, offers a few advantages that investors should understand.
# 1. When you purchase a real estate property, you’re buying a tangible, physical asset that belongs to you — even when it’s not earning income.
#2. Real estate delivers an immediate passive income. Renting out the properties you purchase means you can begin bringing in a stream of income right away.
#3. Real estate can be a more reliable investment than many of its alternatives, especially when it involves homes since people always need a place to live.
#4. Real estate investing comes with awesome tax perks. The tax perks of real estate investing mean you get to keep more of the money you earn.
How Tax Perks Create Advantages For Real Estate Investors
Let’s take a closer look at some of the tax perks that come with real estate investing, so you can understand what a significant advantage they provide.
The U.S. tax codes give real estate investors legitimate tax breaks. These breaks let real estate investors keep more profits than they would with other types of investments or even high-paying careers.
For example, if you’re a top heart surgeon with amazing skills, you might make a million dollars a year.
A million dollars a year sounds like a lot of money — until you realize you’ve got to hand nearly half of it over to Uncle Sam.
Despite your million-dollar income as a top heart surgeon, you probably only keep $500,000 – $600,000 of the million dollars you earn each year.
Real estate investors get to keep more of their income.
Now, imagine you’re a real estate investor instead of a heart surgeon.
You purchase an investment property for $100,000, and it increases in value to $1,100,000.
Wow! That’s a nice profit!
If you were a heart surgeon, taxes would take nearly half of it.
A real estate investor can reinvest their real estate earnings into a larger property without having to pay any taxes at all (thanks to the “1031 Exchange”).
Now you own bigger rental property that delivers a higher monthly income straight into your pocket.
But that’s not all.
You also get special tax breaks on the income you earn from that big rental property.
Imagine how these kinds of tax breaks might contribute to your wealth if you continually reinvest your profits along the way.
Critical professionals such as doctors, surgeons, and lawyers are vital to our communities, so we’re not telling you to avoid becoming a surgeon!
Regardless of what you do for a living, though, you need to invest your money properly to build wealth.
Real estate investing provides fantastic opportunities for people to build wealth, and the tax benefits make it even more lucrative than many other types of investments or earnings.
How To Get Started Investing On A Budget
Learn how to start investing in real estate for as little as $500.
The entry price to real estate investing can be high.
Before you purchase your first property, you need to save up enough money to buy it in cash or at least make a significant down payment.
Fortunately, there’s another way to begin investing in real estate before you save tens of thousands of dollars to buy your first property.
At Fundrise, you can invest your money into a portfolio of real estate funds. For as little as $500, you can become part-owner of dozens of properties.
You also get a share of the profits. Each quarter that your property values rise, you get a dividends payment.
Opening an account on Fundrise means you can invest in a collection of real estate properties without having to personally oversee them. You get access to detailed information about your properties in the Fundrise dashboard, allowing you to monitor them for growth.
Fundrise provides a unique opportunity to gain experience in real estate investing, even if you’re working with a small budget or you’re anxious about making your first purchase.
Real Estate Investing Creates Passive Income
Investing in real estate provides several advantages over other types of earnings.
Owning tangible assets, generating immediate income streams, the demand for properties to live in, and awesome tax perks make real estate an attractive, reliable form of investing.