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Real Estate 101
What is Real Estate Investing?
When we use the term “real estate investing,” it refers to a specific approach that does not include flipping and reselling for profit, which are considered “real estate trading” rather than investing.
Real estate investing creates a stream of passive income with one simple idea: you buy properties and rent them out to other people.
The rent you earn from those properties becomes a passive source of income, leaving your time free to do other things such as work, run a business, search for more investments, or enjoy some free time.
Real estate investors purchase residential and/or commercial properties such as single-family homes, office buildings, and retail spaces, for the sole purpose of renting them out to tenants to generate passive income.
Investing in real estate is one of the best ways to build wealth for several reasons.
First, the passive income stream you get from rental properties leaves your time free to generate even more money.
Second, real estate investing provides tax benefits that help you build wealth more quickly.
Third, no matter what the economic situation, people will always need a place to live. This makes real estate a solid investment for the long-term.
Real estate investing also gives you a tangible, physical asset that you own – whether or not you’re collecting an income from it. This doesn’t mean that you’re guaranteed to make a profit or that real estate is not without risk.
Investing versus Saving
Investing is best for long-term goals, like retirement. Investing gives you growth over liquid assets and counters inflation. Your money is working on itself, whether the economy is booming, the area you’ve got real estate in is rising or you’ve backed a startup that is taking off. The money you’ve invested will have a return when you go to use it down the road.
Saving is best for short-term goals where you can easily access this money. The downside of stashing the money away in a high-yield savings account or Certificate of Deposit (CD) is inflation, currently at 3%. This means that if you put $100 dollars in your sock drawer for next year, your spending power will be roughly $97. You effectively have less money than the previous year.
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