Invest in your future by investing in real estate

As you start gaining more income in your business, you need to start thinking about the types of investments you can make to grow your wealth. You may already be thinking about investments like stocks and bonds, mutual funds, and exchange-traded funds (ETFs). One of the other smart investments you can make is in real estate. Home ownership is the best thing you can do to solidify your future financial success.

I always encourage my team to make real estate investments because of how much wealth you can gain from it. If you’re looking for a way to diversify your portfolio, the following recommendations can help you make a wise investment that will pay for years to come.

Buying a home of your own is always a smart investment. If you’re weighing decisions between renting and buying, the purchase of a home should always win between the two. Being a home owner is one of the smartest ways you can invest in your future.

Consider this: data from the Federal Housing Finance Agency shows the compound annual growth rate for homes in the United States averaged more than 4 percent from January 1991 to August 2023. Yet from January 2012 to August 2023, that growth rate was 7.5 percent. That means that even despite the recession of 2008, real estate has remained profitable. And when you boil those numbers down even further to North Carolina alone, the state’s housing prices appreciated by 309.9 percent since 1991. Home ownership is one of the few investments that get this outstanding type of return on investment. 

If you already own a home, another way you can start building your wealth through real estate is through the purchase of a rental property. If you have a good real estate agent who gives you insights into available opportunities, or if you happen to find a home in a great location, it’s a great idea to purchase a rental property for additional income. If you already own a home of your own, you’ll want to have a down payment ready to secure a second mortgage, unless you can pay cash for the home. If there are no major repairs that need to be made to the home, you can start renting it and building your wealth immediately.

Keep in mind that a rental home may come with additional costs. For instance, becoming a landlord means you’ll have additional costs like maintenance and property management, though many of these costs are tax deductible. If you’re willing to invest in rental homes for the long term, it’s a passive way to earn income while watching your equity grow over the years.

The majority of people who purchase a vacation home make the investment for two reasons: to generate income or to sell the home later for a profit. A vacation home is a great way to create income through short-term rentals in a vacation destination while also helping reduce costs the next time you vacation yourself.

To buy a rental property, you’ll want to work with an established agent in the destination you’re looking. You’ll likely also want to work with a property management company to ensure the home is properly cared for while you’re away. As is the case with other rental properties, many of the costs involved with a vacation home are tax deductible. Keep in mind that this type of property may take time to buy or sell, and you won’t want to make this type of purchase if it’s a short-term investment. But if you’re committed for the long term, it’s a great way to boost your wealth. 

Thanks to new laws in Raleigh that allow the addition of accessory dwelling units (ADUs) like small cottages, above-garage apartments, attached units, and granny flats on the same lot as a single-family home. As a homeowner, you can build an ADU for a rental right on your own property.

An ADU must be built by a licensed contractor or builder, so you’ll want to price the unit accordingly. The great thing is you can use equity on your home or cash savings to build the unit, and it will pay out in the long run. Make sure you’re planning on staying in your home for a few years if you take equity out of your home. However, an ADU may boost your home’s resale value by up to 50 percent. Either way, it’s a wise use of your money to invest in one of these units. 

If you’re interested in investing in real estate but don’t want to consider applying for a second mortgage or loan, or you don’t have the cash to invest in a large-scale project, you should consider a real estate investment trust. Structured much like a mutual fund, a REIT is a pool of funds from multiple investors. This means you buy into a REIT like you would a stock, and you can trade them if you’re ready to sell.

REITs are also straightforward. It’s the trust that finances the property, so the trust handles leasing and distribution of income on the commercial space to its investors. You can work with your financial planner to find the best REITs in which to invest. They’re a great way to get into real estate investing. They can also diversify your portfolio and provide long-term appreciation for your financial gain.

Real estate will always provide a great return, no matter how you choose to invest. If you’re in the Triangle area and are interested in investing in real estate, get in touch. My team will guide you through the opportunities we have available that will build equity and grow your future wealth.

Jim Allen is a business leader and entrepreneur who has built one of the top-producing real estate groups in the Triangle. He is President of The Jim Allen Group, which is consistently named one of the top real estate teams in North Carolina and even North America.