If you are interested in creating a real estate portfolio from scratch and don’t know where to start, this post is for you. Contrary to what it may seem, you don’t need a large amount of money to get started in the real estate sector and I’m going to prove it to you.
Get the financial security and freedom you want thanks to the real estate business. In this guide, I tell you what its advantages are, what investment may be the most suitable for you and various tips to make money with your properties, among others.
Real estate assets, what is it?
Real estate assets are the set of real estate assets that a person owns, such as, for example, one or more homes, commercial premises, apartments, houses, industrial warehouses, rural plots, garages or building land.
Why is it so interesting to invest in real estate?
Real estate investments are an excellent alternative if you want to create a profitable and scalable asset in the medium and long term in order to grow your capital and ensure your financial peace of mind.
Advantages of creating a real estate estate
- Accessibility. You don’t have to be an expert to build a solid and profitable real estate portfolio. However, it is important that you have the help of expert advisors or that you train yourself in the real estate business, which is essential if you want to make the best decisions.
- Additional income. Investing in properties will not only provide you with a stable asset value over time, it will also offer you good returns. An example? You can rent them out, monetizing your investment in a short time.
- Security. Having a network of properties can provide greater financial security in situations of financial crisis, as you will have various properties that you can sell for a capital gain, or invest in apartments to rent in exchange for an income. They are also the ideal solution to protect your finances in the event of any financial setback in your life.
- Low risk. Unlike other sectors, such as the stock market, it presents a lower risk, making it a great option for investors with a conservative profile.
Creating a real estate portfolio from scratch, where to start?
Obviously, before you can make money from your real estate assets, you will need to acquire one or more properties. In this regard, there are two options to consider: buying or real estate crowdfunding, the ideal solution if you do not have the necessary capital and cannot – or do not want to – ask for a mortgage or loan from the bank.
Buy a property
If you do not have any type of property, to create real estate assets you will have to invest in real estate.
You can buy from large commercial premises to houses, apartments or flats. Of course, you also have the option of opting for more economical options, such as a small plot of land (urban or rural), a garage or a storage room. Everything will depend on your needs, your budget and what you are willing to invest.
Bet on real estate crowdfunding
Typically, the purchase of real estate requires a high initial capital, either your own or borrowed. For those who do not have it, real estate crowdfunding can become a good alternative, as it offers the possibility of investing in the sector without having to make a large financial outlay.
But what is real estate crowdfunding? It is a system that allows you to buy properties jointly with other small investors. It works through various platforms, which are responsible for finding, conditioning and buying these properties to then rent them out or sell them. So, you just have to access the projects, compare the different options that exist and invest in the ones that interest you the most.
Prices vary from one project to another, but to give you an idea, you can find very attractive shares, starting from just 50 euros. Without a doubt, a great solution that will help you create a real estate asset from scratch and with which you can make a profit without having to spend too much money or go into debt.
Options available to make your real estate assets profitable and make them grow
Do you own real estate? If so, you are probably wondering which investment is the best. Keep reading, because I will show you the most relevant ones.
Property rental
Without a doubt, the perfect option if you want to have recurring passive income that increases your monthly income or is the ideal complement to your pension. The idea is simple: you buy a home and put it up for rent, easy and simple.
If buying a flat or a house is an expense you cannot afford, you have other alternatives, such as acquiring properties such as parking spaces or storage rooms and renting them out.
Now, remember that this is an alternative that also has its risks:
- Tenants who don’t pay. To avoid this type of situation, it is best to have non-payment insurance and to analyze in detail the solvency of the possible tenants. Likewise, you can also ask for a guarantor and a deposit, additional guarantees that will give you extra security and peace of mind in the event of possible setbacks.
- Maintenance and additional costs. As a property owner, you have to take care of the maintenance of the property: repairs, damages, etc. Therefore, it is always a good idea to have damage insurance. Otherwise, you risk losing money.
Rental of tourist apartments
Another idea to increase your returns and increase your real estate assets is to buy tourist apartments to rent, for short periods of time, to tourists who want to get to know the city.
Unlike the previous point, buying a tourist apartment requires a greater investment of time, since the management of contracts with tenants will be carried out more frequently. Of course, if you do not want to take care of the paperwork, you have the option of delegating the tasks to a specialized company.
The advantage, compared to renting out regular homes, is that the profits are usually higher, especially in high season or during the celebration of some important event: city festivals, concerts, important events…
Amortization of mortgage loan
When you buy a home, you can pay off the mortgage by renting out the property. This is a way to pay off the debt without investing your own money and, at the same time, increase your assets.
Of course, you must take into account several aspects:
- Set an appropriate price that will allow you to pay the loan and associated expenses, such as property tax, property maintenance, community fees, etc.
- If you opt for a mortgage, make sure it is affordable. Bear in mind that if you cannot find tenants or they decide not to pay, you will have to pay the monthly payments out of your own pocket.
- Minimize the risks. Study the solvency of the tenants before signing the contract, take out damage insurance, request non-payment insurance…
Lease of commercial premises or land in operation
Another way to make money with your real estate investments? If you own a commercial premises with valuable equipment inside (office furniture, industrial machinery, etc.) or a piece of land that is already in operation and where its exploitation is permitted (forestry, agriculture, etc.), you can obtain great returns by renting it out.
As these are properties with added value, rents are usually higher, allowing you to benefit from regular extra income.
Buying and selling properties
Buying and selling allows you to increase your capital in the long term. The idea is to get a property at a certain cost and then sell it at a higher price.
There are mainly two options for this:
- Buying a property and selling it after a few years. Property values generally increase over time. So, a good alternative is to buy a house or any other type of property and wait for the right time to sell it at a higher price than the initial one.
- Buying a property, renovating it and selling it. In this case, it is not necessary to wait so long to sell it. You can buy, for example, a house and invest in its renovation and refurbishment to increase its value and sell it a few months later for a higher price.
Tax aid
In certain countries, it is possible to benefit from tax breaks for the purchase and sale of real estate assets. This will undoubtedly allow you to earn income and increase your assets. For example, did you know that in various holiday areas, there are incentives for retirees to buy their homes there?
However, in these cases, it is advisable to have a specialized advisor to help you with the process. Bear in mind that you will need to know in detail the possible tax exemptions, requirements or different legal and financial aspects.