Purchasing property is a major financial decision but if you take care of your investment, it can lead to financial freedom. For this dream to turn into a reality, though, property owners must follow certain steps and strategies. You should also strive to learn as much about real estate as possible to make sound decisions throughout your journey to financial freedom. If you want to achieve financial freedom through property investments, here’s what you need to know.
Initial Steps to Reach Financial Freedom Through Property Investments
There are many ways to go about attaining financial freedom through property investing. Regardless of the method, it’s important to start your journey to financial freedom on the right path. Here are the initial steps to take if you have yet to purchase property or are currently building your portfolio of properties.
1. Formulate a Property Investment Plan
Think about what you actually want to achieve with property investment.
Financial freedom means different things to everyone so another man’s path will not necessarily be the same as yours. Thus, it’s important to have a property investment plan with a solid, actionable financial goal.
When creating a financial goal, ask yourself this question: “How much passive income do I want to generate?” Your answer will determine which type of property is best suited for you and what steps you need to take at the start of property investing.
Having an investment plan is important because it will guide all your future decisions. Keep in mind, though, that a financial goal should be realistic. It isn’t meant to be the end goal. After you achieve your financial goal, that’s the time when you can grow your investments to reach an ideal goal.
2. Make Sure Your Finances Are in Order
Financial freedom is only possible if you know how to manage your money. Prior to investing in property, make sure that your finances are in order. You should settle existing debts or loans. Otherwise, the money you make from property investing will go directly to payments.
Financial freedom means having the entire income at your disposal. Learning how to budget is crucial — even after you have already purchased an investment. Always make sure that you have more money coming in that out in order to attain and sustain financial freedom.
3. Develop the Right Mindset for Property Investment
Property investing will be very difficult and stressful at times. That’s why it’s important to develop the right mindset from the beginning.
You need to be patient because financial freedom will not come overnight. In the first days, weeks, or months, you may only see minimal profits. Do not lose hope. As long as you do everything right, you will eventually see larger profits.
When faced with stressful situations, stay focused on your financial goal. Do not succumb to your emotions — even in the face of destructive criticism or detractors.
It’s important to remain level-headed. Rather than acting rashly, take time to develop an action plan that will alleviate any issue you might have. Having the right mindset will make the journey to financial freedom much enjoyable.
4. Educate Yourself on Real Estate and Property Investment
Aspiring investors should make it a point to educate themselves on real estate and property investment. It might not be a requirement but being fluent in topics like property tax, property laws, and financial management will make the process much easier. You don’t have to spend a lot of money on courses or programs. You can already learn a lot from online articles, books, videos, and other resources.
5. Create a Team of Property Investment Experts
Property investing should be treated like a business. And accordingly, it’s important to have a team of experts by your side.
To ensure the success of your investment property, enlist the services of a financial planner, an accountant, a real estate agent, a financial agent, and a solicitor.
5 Strategies to Achieve Financial Freedom Through Real Estate Investments
Once your investment plan and finances are in order, you’re ready to purchase a property. Here are five strategies that can help you attain financial freedom through property investments.
1. Cash Flow
Cash flow is a strategy that ensures that income generated from a property is more than your expenses — including mortgage, maintenance, management fees, and other costs.
Benefits of Cash Flow:
- Higher borrowing capacity
- Extra cash flow
- Self-supporting
Disadvantages of Cash Flow:
- Low capital growth
- Minimal tax benefit
- Lower equity build-up
2. House Flipping
House flipping entails purchasing a worn-down property and renovating it to increase value and rent. This method requires a solid understanding of the local real estate market. You want to make sure that renovation expenses do not exceed the expected value of the property.
Benefits of House Flipping:
- Quick increase in property value
- Easy way to make a profit
Disadvantages of House Flipping:
- More upfront, unexpected expenses
- Profit is not guaranteed
3. Capital Growth
With the capital growth strategy, investors buy a property with the hope that it will increase in value over time. It will entail a lot of research as you need to make sure that you are purchasing a property in an area that has a high growth rate.
Benefits of Capital Growth:
- Long-term growth benefit
- Passive form of investment
Disadvantages of Capital Growth:
- Difficult to pinpoint market peak
- Financial constraints (mortgage, maintenance, management)
4. Owner Financing
Owner financing will have investors acting as a bank. In this strategy, an investor will buy a property for cash.
You can renovate to increase property values. Then, the property is sold to another buyer. You will charge interest which the new buyer will pay back over time.
Benefits of Owner Financing:
- Stable cash flow
- No maintenance, management, and other costs
Disadvantages of Owner Financing:
- Mortgage must be paid off
- Buyer stops making payments
5. Property Equity
Property equity is a strategy that entails purchasing properties, growing their value, and then getting an equity loan. This will increase your mortgage payments but when you buy another property, you will also be able to increase income from rent.
Benefits of Property Equity:
- More equity growth as you acquire more properties
- No required payments or interest charges
Disadvantages of Property Equity:
- Difficulty getting a loan due to age and employment requirements
- More suitable for investors with large portfolios
Begin Your Journey to Financial Freedom Through Property Investments
Attaining financial freedom through property investments is not an easy undertaking. There are a lot of risks involved, especially when you’re dealing with a large amount of capital. But if you educate yourself properly, make smart financial decisions, and consult with a team of experts, you will be able to see big payoffs.
Sooner than later, you will be able to attain financial freedom through property investments. If you want to enjoy passive income, you can also hire a property management company to take care of all the tedious tasks.
If you want to build your team of experts, feel free to browse our online directory for property management companies, HOA management companies, and real estate agents.
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