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Why the Rich Invest in Real Estate: Are You Missing Out?

The Rich Invest in Real Estate

The rich don’t get richer by buying extravagant things. The rich invest by using their wealth to create more wealth: investing in things such as businesses, art, and, of course, real estate.

A volatile equity market lead financial planners and investment advisors to seek investment opportunities that could beat inflation. Their wealthy clients want stable returns that don’t cap out at two percent per year.

That strategy had led to a burgeoning real estate market, making it a top investment choice among high-net-worth investors.

Where The Rich Invest to Create Wealth

High-net-worth people regularly invest in raw land, residential properties and commercial properties. Some buy several homes in core markets all over that they can live in while they travel, in hopes that these lavish homes will continue to appreciate handsomely in value.

Others pool their resources with other investors to buy income-producing commercial properties or high-priced condos in attractive locales such as New York and London, where prices should to continue to appreciate. Those who invest for appreciation may also choose to buy and hold raw land, which, when developed, will likely yield attractive profits.

Wealthy investors aren’t always looking for price appreciation, though. Income investors look for stable, secure returns. An investment property that yields a stable cash flow might not appreciate in value, but they generate dollars from monthly or yearly leases, often at much higher returns than other investments might yield.

Where Middle Income People Can Get In

So how does the average middle-income earner invest like the wealthy? You may not have the cash to buy a posh townhome in Los Angeles, but you can buy a home in your neighborhood to rent. As that one begins producing cash flow, you can buy another, methodically building up a portfolio of investment properties.

As those appreciate and sell, you can adjust your investment strategy to best fit your goals for the realized gains.

Public companies also buy both commercial and residential real estate properties. Any stock market investor can purchase stock in these professionally managed Real Estate Investment Trusts (REITs). Like any investment, the price fluctuates, but the stocks tend to rise as rents and property values increase.

If you don’t want to deal with the day-to-day work involved in renovating houses for quick sales or rental properties, you can also act as a silent partner for a seasoned real estate investor. Successful investors often seek capital for their next projects from private lenders. Investing your money with someone who has demonstrated success in the market can often yield much higher returns than putting that same amount in savings or bonds.

Real estate investments, like any investments, require research and due diligence. Everyone should make investing part of a well-planned, long-term strategy based on sound information, and an honest assessment of personal goals and investment parameters.

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