Building Wealth via Investment Property

Investment property is a business of capital. That is, you put large sums of money into a property with the goal that you generate a higher amount of money by either selling or renting out this property. That is a pretty spartan explanation of a way of life. There has to be more to investment property than simply putting one sum of money into a venture, and getting a larger sum of money out the other end. To that I ask you to consider what is your purpose engaging in investment property activities.

There are various reasons that anyone gets into business – the overall explanation being “to make money.” But this can come in many different forms. One individual might have gotten into investment properties because they were laid off from their career job and needed some way to pay the bills. Another person may have had it on their mind that investment property would lead to large sums of money which would let them get that shiny new red Lamborghini. Whichever your reason for getting into the business, it is important to consider your purpose in order to determine your path.

Let us say that your purpose is to build wealth – and perhaps along the way make sure you can pay bills and live a comfortable lifestyle. There are two mixed signals in this idea. If your sole motivation is to pay the bills and live a comfortable lifestyle, then you are likely looking at your monthly costs – and you are likely making business decisions that lead to a certain amount of monthly income. Before I continue, there certainly is nothing wrong with this. You can invest in properties which you may other people to manage the rental of (thus resulting in passive monthly income).

However, if you want to build wealth – you need to think bigger, and faster. The single best way to build wealth is by selling. Think of big companies and their leaders (or former leaders) and how they got their wealth – Microsoft, Facebook, Google – etc. Did they attain their wealth by selling products every month? No. They attained wealth via IPO – selling large portions of their company to other people.

The fastest and easiest way to build wealth is by selling – which is a perfectly viable option for property investment.
The most common form of this is where you find the diamond in the rough – the junk property in the nice neighborhood – fix it up and sell it for a profit. Pretty straightforward. Ultimately this is about acquiring property at a certain price, improving the value of that property, and then utilizing the increased value to sell at a higher price.

You don’t have to limit yourself to buying, “fixing,” and then selling properties. Why not use this strategy for rental properties as well? Consider finding properties that could be turned into rental units – or which may already be rentals units but not performing at peak efficiency. You invest in the rental property at first – already you begin earning a monthly income, but when you raise the value to a certain point you sell for a large capital increase. Then you reinvest – rinse and repeat.

Anything can be sold – this is all about establishing value. There is great value in a rental property not just because of the property but because of the automated passive income that it can represent (provided you have established correct management strategy to allow you to be completely hands off).

Whatever you decide your goals are with property investment it is important for you to understand what those goals mean, so you can make the best decisions from beginning to end.

Photo: smarthomeagents via Flickr CC

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