Real estate remains a popular investment choice. While all investments carry risks, putting money into bricks and mortar is one of the safest bets, providing you choose the right time to buy and sell. If you’re thinking about trying to create real estate investment success by purchasing a house or condo, then this is the perfect post for you!
We’re going to capture a few real estate investment success stories, learn more about the success rate in real estate, and most importantly, we’ll look at a bunch of steps that can improve your odds of winning as a real estate investor!
Real Estate Investment Success Stories
There are so many real estate success stories out there. Stories of normal everyday people buying up real estate and producing a $10,000/month income all the way up to billionaire tycoons that have invested aggressively and won big.
For the billionaires, they often had a successful career (or inheritance) that fueled some large real estate purchases early in their life. It’s possible for people to do today, but it’s not likely that the average Joe will buy his first real estate property in his 30s and become a billionaire in just a couple decades.
But that leads us to the question, “What does real estate investment success mean for you?” I’d wager a bet and say it’s not billions of dollars.
Why might you want to get started in real estate investing?
Chances you’re looking for real estate success for one of the reasons below:
- for some additional passive income
- as a constant income so you can feel better about quitting your job and starting your own business
- for an early retirement
Do you need to be a billionaire to do accomplish any of the above items?
So let’s focus on some local real estate investment success stories that I know about — One is little ol’ me. And the other is my sister and brother-in-law.
My Personal Real Estate Success Story
Our first home purchase
I purchased my first house in 2012, the exact low point in the housing market in our area. It was a 3 bedroom, 1.5 bath home in a downtown neighborhood for my wife and I. And, we payed a whopping $75,000 for it. 🙂
We redid the floors, painted the outside, and I’m pretty sure we painted every room in the inside of that place too! We actually lived there ourselves for 6 years.
Next, we bought our first rental in 2015 for $81,000 (yes, the market was still incredibly soft). Our first year, we rented it out for $1,200 a month. Today, we enjoy rents of $1,400 a month and we’ll likely increase those to $1,500 next year!
Rental #2…Turned into a flip house
Third, we bought a place in 2017 for $75,000. The market was more solid, but this place was rough. It needed a TON of work (it smelled like smoke, wet dog, and cat pee…It was bad.). We ripped up all the flooring and stripped this house down to the studs. I ended up working on it in my spare time for 8 months.
The plan was to make this a rental…but with all the time away, it nearly tore our marriage apart. My wife gave me instructions to sell it and get it out of our minds and out of our lives. I obliged.
Related: That Time My Wife Was Right
Sometimes real estate investment success doesn’t mean owning 20 rental properties and retiring on the beach somewhere. I learned that first hand.
Three years ago, our family was growing, we were getting tired of the downtown life, and my original plan of buying two rentals, turning our primary home into a third rental, and then buying a place with cash out in the country was just taking too long. We decided to change up the plans a bit.
In 2018, we sold “Rental #2” immediately after the remodel. We sold it for $131,000. Not a bad profit on a $75,000 investment (plus $20k in repairs)!
Later that same year, we sold our primary house. We originally paid $75,000 and sold it for $156,000 just 6 years later (the housing market was getting nuts!).
And, not long after that, we used those dollars to buy the home we live in today – a 2,000 square foot two-story with 3 bedrooms and 2 full baths on 6 wooded acres. We simply love it here (and it was a Godsend to have 6 of our own acres during the pandemic!!)
Today, we don’t own a mammoth rental empire, but our real estate value (between our rental and our primary house) is $600,000. Not too shabby for starting with nothing less than a decade ago!!
In the future, we definitely plan to invest in more rentals. The appreciation has been phenomenal and the passive income is amazing!
My Sister and Brother in Law’s Real Estate Success Story – The House Flippers
This is another real estate investment success story, but it’s also a bit unconventional again.
My sister and brother-in-law don’t buy houses to rent. They buy them to flip! They have done this probably 10 times and they have never lost money on a house. In total, I would estimate that they have earned over $200,000 with their house flips.
Their reason for flipping houses?
- To fund a private education for their six children!
- And…because they are terrible landlords (they tried it once, I think their tenants stopped talking to them) 😉
The market is hot now, so real estate deals are hard to come by, but they’re still making connections and doing deals. I imagine they’ll earn hundreds of thousands more in the upcoming years.
Want to follow their story? Check them out on Facebook!
The typical new business venture is only successful 30% of the time. BUT, guess what the success rate is for real estate investors? Do you think it’s worse? Better?
The real estate investment success rate is actually quite a lot better than the typical business.
According to Fortune Builders, finance, insurance, and real estate businesses have a success rate of 60%! That’s double the success rate of a typical business.
If you’re interested in real estate investing, this is great news! But why is the success rate so much better in real estate? What makes it that much different from a standard business?
In my opinion, the real estate investment success rate is high because…
- Investors of real estate have a long-term mentality, which helps them through the ups and downs of investing
- Real estate produces a cash flow AND increases in value, making the investment all that much more valuable and fun
- Banks only provide funding to those that can afford the payments AND the risk, which reduces the investor’s odds of making a stupid transaction
And, my final point is, it’s fun! It’s pretty cool to buy a place, rent it out, pick up the rent checks, and drive by your physical asset every once in a while!
Is Real Estate Investing Still Profitable?
It’s been no surprise that housing values have been shooting through the roof (pun intended :)). And, it looks like they’ll only continue to rise into next year. So…is real estate investing still profitable? Can you really get enough in rent to cover the cost of your rental property?
It certainly is more difficult today, but there are still places out there that can be bought and rented out for a profit. You’re just going to have to be more patient.
Let’s take a look at an example from my neck of the woods in West Michigan.
Real life example of a profitable rental
Recently, a house came on the market in my area for $160,000. It was a 2 bedroom, 1 bath house that really didn’t need much work at all. It was in a great area and I figure it could yield rents of $1,200 a month.
An investor could:
- put 20% down ($32k),
- get a 30 year mortgage at 2.9%,
- and the result would be an $800/month payment (including property taxes and insurance).
If the investor earns $1,200 per month and owes $800, this would produce $400 a month in profits. Then, of course, there are maintenance items that will pop up (which are usually 1% of the home value, or $1,600 a year in this instance), so your profits are more like $250 a month. So still not terrible! It’s a positive income!
On top of the cash flow, the house will likely increase in value by 3-5% each year, which is just an added benefit to your net worth.
So, long story short, yes, real estate investing is still profitable today. Not as much as it once was, but certainly still profitable.
What makes a good real estate investment?
There are plenty of criteria for a sound real estate investment (we’ll hit many of these in the 7 steps below), but there are two main ones:
- The rents will allow you to earn a profit each month
- The value of the property in that area is increasing sharply
The first one is a no-brainer. If you don’t earn a profit, you will ultimately lose in the real estate investment game.
The second one is equally important though. If you want a good real estate investment, you need to invest in structures that people want. With a high demand, your values will go up for one. But also, if you invest in a high quality area that’s showing growth, you’re more likely to attract high-quality tenants.
If you check both of these boxes, you’re well on your way to real estate investment success.
Can You Become a Millionaire By Investing in Real Estate?
The other question I get often is, “Can you become a millionaire by investing in real estate”.
I mean c’mon, I bought one rental and just flipped a couple houses, and the value of our real estate portfolio is over $600,000 today! If you would just work slightly harder than that, you could become a millionaire in real estate.
Want a clear path to become a millionaire by investing in real estate? Here’s a post I published a few years back. The investment numbers will be more today, but the concept is the same.
Check it out! How to Make a Million Dollars in 10 Years
Want Real Estate Investment Success? 7 Steps to Improve Your Chances
Alright. So I’ve got your attention. Lots of money can be made in real estate and quite a few people have had success doing it!
So what’s next?
What are some steps to achieve real estate investment success?
Check out the below and apply these tips! You’ll almost certainly be better off because of it!
1) Setting a Budget
Real estate investment is not accessible to all, and in most cases, you need a significant amount of capital to get started.
The first step any prospective investor should take is to assess their finances.
- Analyze your accounts,
- determine if you can afford to buy a property,
- and set a budget if you want to go ahead.
The cost of real estate today ranges from less than $100,000 to millions of dollars, and it’s always beneficial to go into a search with a budget in mind.
Setting limits helps to prevent overspending, and it will also make it easier for you to narrow down your search options.
It’s wise to avoid stretching yourself too far, especially if you’re looking for a long-term investment, which is unlikely to yield significant profits for some time. You want to be able to live comfortably while your assets are appreciating.
2) Exploring Property Types
There is a vast array of properties on the market today. One of the most crucial considerations for real estate investors is the type of property to buy.
- Are you looking to snap up a vacation home in a tourist hot spot?
- Or are you thinking about buying a family home in a popular suburban neighborhood?
- Have you got your eye on an apartment in an up-and-coming part of the city?
- Or are you looking for a bolthole that will attract visitors enjoying a weekend away?
Think carefully about the kind of property you want to buy and try to focus your search.
It’s essential to conduct extensive research before you make any decisions to ensure that you’re making the right choice at the right time.
If the rental market is booming, for example, you may wish to buy to let, rather than to try and flip houses. If there has been a surge in people taking vacations near the coast or in the mountains, this may affect your search. Use data, look at trends and take your time to make decisions.
Depending on whether you want to buy and sell or buy to let, it is critical to identify an ideal buyer or tenant before you start looking at properties and creating a shortlist.
If you truly want to experience real estate investment success, then this is an important steps. Don’t take it lightly.
- Think about who you want to target, and narrow down your options accordingly.
- From students and young professionals to first-time buyers, retirees, families and tourists, there are many different markets and demographics you can aim for.
- Use data to analyze rental demand and average sale prices in different locations.
If you’re targeting families, for example, proximity to amenities, good schools and leisure facilities is more important than being close to tourist attractions.
If you’re looking for a property that will appeal to seasonal visitors taking a vacation, being close to landmarks, popular tourist spots and areas of natural beauty will stand you in good stead to make profits.
4) Finding the Right Location
Want to achieve success in real estate? The location of a property can make or break it in the eyes of prospective buyers and fellow investors.
While some locations are sought-after, others are less desirable. As an investor, it is extremely important to consider the location of every property that makes it to your shortlist. The location should be relevant to your ideal buyer and your budget. Tailor your search to maximize the chances of being able to sell or rent your property quickly and generate as much money as possible.
If you can’t afford to buy in an established hot spot, look for areas that are becoming more popular and neighborhoods that are growing due to investment, building and new transport links.
When considering locations, it’s also wise to keep an eye on emerging trends.
In the last year, for example, there has been a surge in the demand for properties with outdoor space, with many people now working from home and commuting to work less frequently. This trend is also likely to mean that homes that have offices or garden rooms are more appealing.
5) Contacting Local Agents
One of the best ways to get ahead in the real estate game is to maintain positive relationships with local agents and agencies. If you have strong ties with agencies, there is a good chance that you will hear about properties that are coming onto the market before it becomes common knowledge.
Liaising with agents can also be useful when it comes to making offers and negotiating the best possible fee.
Once you have chosen a location, or you have an idea of the general area you’re looking at…
- Get in touch with reputable, reliable, experienced real estate agents.
- Discuss your preferences and requirements
- And start arranging viewings.
Timing plays a crucial role in achieving success with any kind of investment.
The property market can be unpredictable.
There are several factors that affect prices, including:
- the demand for housing,
- the strength of the economy,
- taxes and changes in interest rates,
- and political unrest or uncertainty.
The key to achieving success in a real estate investment often lies in buying and selling at the optimum moment.
It’s best to try and buy when prices are low and the market is slow and to sell when prices are rising and demand is increasing. If you sell your house when homes are selling quickly and lots of buyers want to move, prices will be higher and you may be able to get a lot more for your property and sell faster.
If the market is stagnant, people are not moving and prices are falling, the value will decrease and you may find that it takes longer to sell.
And, if the market is flat, and you were thinking about selling, it’s beneficial to bide your time and wait for signs of recovery.
7) Looking for Potential
Some properties will always sell quickly at a profit, but not every investor can afford to buy in sought-after locations.
If you’re looking to generate profits without breaking the bank or finding yourself in a bidding war, it’s always worth focusing your search on looking for a house that has potential.
If you can’t afford a pristine home in a desirable neighborhood, there are options.
- Consider a fixer-upper or a home that needs a little TLC or move the boundaries slightly to incorporate a wider area.
- Up-and-coming suburbs and neighborhoods that are undergoing regeneration offer opportunities to make money on your investment.
- Look for signs such as building new homes and infrastructure, an increase in the demand for rental homes and houses for sale, and interest in towns and city locations in property magazines and social media. It’s common to read about districts or neighborhoods in big cities that are ‘the next big thing.’
If you buy at the right time, there is a chance to make a substantial amount of money if demand for property suddenly skyrockets.
Real Estate Investment Success – Are You Next?
Real estate is a popular type of investment. And there are plenty of people having real estate investment success!
People have been putting money into bricks and mortar for decades and there are no signs of investment opportunities drying up any time soon.
If you are considering buying a house or an apartment, it’s critical to make the right decisions at the right time.
- Define an ideal tenant or buyer
- Explore different property types
- Set a budget and think carefully about the location
- Contact local agents and build strong relationships
- Look for potential and keep an eye on the market
Those are the steps if you want success in real estate! Are you ready to start investing? Why or why not?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.