For many people, becoming a homeowner is the foundation of their real estate business model. By owning and renting a property, you can earn money in two ways:
1. You will be paid steadily thanks to the cash flow you receive in the form of rent each month. As you use this monthly cash flow to pay for the property and increase rents in line with market increases, your profit margin grows annually.
2. Long-term gains through the appreciation of your property’s equity over time.
You make these profits by selling the property. You can also draw on accumulated capital to finance repairs, improvements, and portfolio expansion.
Owning gives you reasonably good cash flow and a solid investment asset.
It also provides the ability to build a portfolio of properties that can be passed on to your heirs with minimal tax liability.
Interestingly, real estate has been around since medieval times, when royal lords owned land and received payments from those who worked on it.
In more modern times, the real estate industry has created millionaires and billionaires all over the world.
America’s first billionaire, John Jacob Astor, bought huge land around New York City in the late 18th and early 19th centuries. Astor would then lease the land to the developers, who would build on it.
At the time of his death, he was the richest man in America, thanks to real estate investments.
Most high-end homeowners treat real estate like a full-time business.
However, it is possible to do it part time, especially if you use a property management company to take care of the daily tasks at your rental properties. You can also run your rental business from your own home, although many owners eventually choose to set up an office for their convenience.
One way to leverage your role as a homeowner and build your business is to go from owning and leasing single-family homes to owning multi-family properties like duplexes, triplexes, and larger buildings.
This allows you to reduce your property taxes and administration costs while doubling, tripling or quadrupling your profitability.