Everything You Need To Know About Residential Real Estate
In a world filled with uncertainties there is one thing that we should all be certain about, our investments. It can be argued that the collateral damage Covid-19 has brought throughout the world is much worse than the virus itself. Millions around the world lost their jobs, large corporations went bankrupt and small businesses closed down, not everyone saw this storm coming and here we are doing our best to rise amidst this major setback in modern history.
In spite of all this, there are those who remained secure in their needs because they have prepared themselves long before any kind of uncertain event like this could happen. These are the type of people who reminds us that there are plenty of ways to secure ourselves financially for better or for
A secure type of investment that one must look into is a Residential Real Estate. Apart from commercial, industrial and land real estate, RRE offers a lower risk and can be acquired in different ways which we will discuss below.
Ways To Finance Your RSS
There are different ways to finance your RRS and there are great sources where you can study them and discover for yourself what type of financing best suits your need. For now, we will briefly introduce each one of them.
A non-traditional way of funding individual or partnership projects involving small, medium and large scale investments that has fewer regulations and has been gaining traction in recent times. There are platforms dedicated to this type of financing, just do your due diligence and make sure you’re not eating something
bigger than your head.
Investment Property Mortgage
This is best for new property investors who can handle 1-3 properties at a time, it requires a much higher down payment compared to most types at around 20-30%.
Government backed Federal Housing Administration (FHA) & US Dept. of Veterans Affairs (VA) loans
Among the list, this is probably one of the most enticing due to low interest rates and down payment at 3.5%. Most people who would want to have their first home usually looks into this type of financing
Home Equity Loan or Home Equity Line of Credit (HELOC)
Considering that you are liquid and have enough cash for at least 6 months to back an investment, You can consider borrowing against the equity in your residence and use this to finance your other investment properties with down payments as low as 0%.
Commercial RRE Loan
This type of financing is usually for the seasoned investors and entrepreneurs who owns several properties in their portfolio. For most parts, it has a short term-high interest scheme that includes a 15-20% down payment.
Also for the big boys and girls, this type is recommended if you’re planning to invest in multiple properties at the same time like in a community of single-family rentals or a block of homes with a 15-20% down payment as well
Assets And Liabilities
Robert Kiyosaki famously said in his best-selling book “Rich Dad, Poor Dad”, that basically liabilities are things that take money out of our pocket and assets are things that put money in our pocket. So the question is, in what category does RRE belong? The answer is, it depends. Your home can be a liability if you build a million-dollar mansion where only 2-3 people live, the cost for its maintenance will only take money out of your pocket annually, unless you’re a billionaire like Elon Musk, it would not be very practical to take this route. However, if you decide to make your home a money-making asset via rental payments, this is where the magic happens.
A lot of entrepreneurs nowadays are venturing into RRE because of the stable cash flow it provides monthly. Imagine yourself at the comfort of your own home doing the things you love most and not worry too much about money because it literally knocks on your doorstep every month without you doing the heavy lifting, wouldn’t that be great? Indeed, it sounds amazing, but with it comes hard work and careful planning. Nevertheless, the rewards are definitely worth it.
RRE is definitely a great and stable choice for those who are seeking to diversify their portfolio or for those who wish to venture into the realm of real estate. It is a stable form of investment as compared to other types of real estate as mentioned earlier, because it addresses a basic need and a personal right of every individual and family which is to own a home. In times of uncertainty, people will do what they
can in order to preserve and protect it. Therefore, it is up to investors like you and me to provide just and equitable terms to promote a sustainable business and good relationship with tenants.
These investments do not come without risks, but that is the paradox we must accept in order to be prepared for something uncertain. As long as we truly understand what it means to become financially free, acquiring money as a tool to achieve a lifetime of freedom, we will never lose sight of what we dare