Building wealth is a common long-term goal for real estate investors. It’s easy to get frustrated when you buy a property and it doesn’t seem to make you money in the first year or two. This is normal, and even though you cannot necessarily see the immediate cash flow, you’re still earning money. Successful real estate investing requires patience and planning. Especially if you’re thinking more about wealth and less about instant gratification.
Real estate is perhaps one of the best ways to build wealth. When you own rental real estate, you have the potential to earn some pretty impressive returns over the years, especially as your equity builds and your mortgage is paid off. This can help you plan for retirement, save for a child’s college tuition, increase your investment portfolio with additional acquisitions, or build generational wealth for your entire family.
Four major factors contribute to the wealth-building capabilities of real estate investments:
Real estate appreciates quickly. In general, residential properties will see their values double every 10 years.
Rental prices also appreciate quickly, and it isn’t unheard of for rental values to double every 20 years.
Tenants are paying down your mortgage when they pay rent every month.
Tax advantages unique to rental properties include deductions for depreciation, maintenance, and professional services.
Whether you’re looking for your first investment property or you’re interested in growing an existing portfolio, we’re here to provide some insight on how to build wealth with real estate investments.
Start with a Strong Set of Investment Goals
Ultimately, your investment goal is to make money, but you’ll have to drill down a little deeper when you’re plotting the path toward wealth. You’ll need to be specific and detailed when it comes to setting investment goals.
There’s passive investing, which allows you to establish a low-risk investment portfolio with great tax benefits. There is also active investing, in which you might buy homes that need work and flip them to make a profit or rent out short-term vacation properties.
Maybe you want to invest in long-term residential real estate. Maybe you’d prefer short-term vacation rentals. There’s also commercial space.
If you’re asking us for advice while establishing your investment goals, we’ll tell you that our best recommendation is to purchase and hold rental properties. Our experience in Portland property management has demonstrated to us that long-term rentals are the best way to earn cash flow and ROI with increased appreciation.
Next, Look for Profitable Portland Investment Properties
To successfully build wealth as a real estate investor, you need to understand two important things as you get started:
You’ll have to invest time. It’s going to take years to earn some real money that can be easily quantified.
You can only succeed when you buy the right property.
There are the occasional rental properties that will cash flow right away. If you buy a multi-family building that’s nearly at 100 percent occupancy and the residents are reliable about paying rent on time, you’re probably in good shape right out of the gate. But for most investors, it will take some time to see a positive cash flow. That’s okay.
When you invest in the right property, you started earning money as soon as you closed the deal.
The best investment properties for wealth-building, many investors believe, are single-family homes. The Portland market has a lot of opportunities and a lot of diversity. When apartment buildings, duplexes, or multi-family units fit your strategy and your investment goals, you’ll find some great properties on the market, and you’ll want to grab them quickly. It’s still a competitive market in Portland.
Single-family homes are also available in a variety of neighborhoods and sizes. These are attractive to investors who want to earn more rent and see their value increase quickly. With single-family homes, you’ll attract stable tenants and higher rents. You’ll also see your property value appreciate consistently in the short and long term.
Always measure your tolerance for risk before you choose a property. As with any investment that provides good returns, there are risks when you invest in Portland real estate. Traditionally, people have believed the higher the risk, the higher the return. But this isn’t always true. If your goal is to build long-term wealth, we recommend a low-risk strategy that reflects an understanding of the local Portland rental market.
Leverage Current Investments to Build a Portfolio
Building wealth with real estate often means adding to your portfolio. When you continue to add assets to your existing portfolio, you earn more income and increase the value of the entire portfolio. But, growth does not always mean acquisitions. Maybe you’re moving out of one house and into another. Instead of selling that house you’re leaving, why not hold onto it and rent it out? This gives you an opportunity to earn rent and hold onto a valuable asset. You might also find yourself making improvements to the properties you currently own. This will increase their value, allow you to charge more in rent, and attract high-quality residents to the homes. All of these things take you a few more steps toward building the type of wealth you want.
You can also build wealth by utilizing a 1031 exchange when you decide to sell an investment property. Instead of pocketing the proceeds, re-invest the money into a new property and you’ll defer the capital gains taxes you would otherwise owe on the sale. Then, you get to continue earning money with new and more profitable properties.
How Can Portland Property Management Help You Build Wealth?
At PropM, Inc., we do more than provide leasing and residential property management rental homes in Portland. We also help investors build wealth through buy-and-hold real estate investing. Regardless of where you are in your real estate investing journey, we’re here to support you every step of the way. When building wealth is one of your goals, we’ll help you reach it.
We provide education and support so you can make better investment decisions with more knowledge, good judgment, and extra confidence.
Here’s why it’s essential to let a professional property management expert guide you towards real wealth-building when you invest in Portland real estate, and how we can help:
We’ll Work with You on Those Investment Goals
We talked about the importance of investment goals earlier. For new investors, it’s sometimes difficult to put into place what you’re hoping to achieve, especially if you haven’t given it much thought. We know how to take your big ideas and funnel them into actionable plans. We can help you plan and execute, which can be an invaluable resource, especially if you’ve never done this before and you’re not sure of where to start.
We Can Show You Which Properties are Wealth Builders, and Why
While every investor wants to earn positive cash flow on their rental homes immediately, that’s not the only measure of success. When you’re looking for the right rental investment, you might find yourself trying to decide between a couple of properties or even a handful. If you can only buy one, you’ll need some guidance from a property manager to make the right choice. Your real estate agent has their own role to play; they’ll show you the homes, negotiate the deal, and organize the closing details. Your property manager will tell you how much rent you’re likely to earn, what kind of maintenance will be necessary to get the property to market, and how much you should budget to spend over the course of your tenancies.
We’ll also help you think about two important things:
The value of your asset is growing over time. A lot of investors believe they make money when they buy their investment property, rather than when they sell it. The price you paid for that home is a lot lower than what you’ll earn when you sell it. You’re making money, even if it’s not as immediate and gratifying as instant cash flow.
When you own a rental property, your tenant is paying down your mortgage and contributing to expenses.
There are additional ways that your investment is earning you money. Tax deductions for things like depreciation, maintenance, and property management fees will lower your tax liability. You can continue to grow your portfolio and your wealth with a 1031 exchange. Every successful real estate investment career starts with one property. From there, you can grow as quickly as you have the capacity to increase what you own and earn.
Why Work with Portland Property Management?
A rental property takes time and resources. It also takes a lot of expertise to effectively lease, manage, and maintain the property. There are tenants to deal with and laws to understand. You’ll need a strong lease agreement, good relationships with vendors and contractors, and an understanding of fair housing laws, eviction requirements, and the local Portland rental market. Security deposit laws are strict and there are distinct variations between pets, service animals, and companion animals.
It takes time.
Smart investors know that they can earn more and spend less by working with a professional Portland property management company. When you’re ready to talk about building wealth and investing in real estate, contact us at PropM, Inc. We’re open 365 days a year and seven days a week, and we’re happy to help you.
