Those of you that are just starting your real state investment career may be wondering what the best way to build wealth is. In reality there are several different ways to do them. Each way his it’s own benefits and challenges, and no way is necessarily better than another way. You have to find out what works best for you and your personality. In this article we’ll be focusing on the the net worth model. As a note, if you like to take a look at all the different real estate models for building wealth, you probably should buy Gary Keller’s book, The Millionaire Real Estate Investor. It shows the proper ways to build wealth as an investor using real estate.
The nice thing about the net worth model is that it effective because it can be low risk and you don’t have to reinvent the wheel to implement it.
Follow the leaders
You don’t need to jump from method to method in order to begin your real estate career correctly. The fact is there are already plenty of successful real estate investors. All you need to do is follow their proven strategies. It’s a smart way to start your real estate investment career out correctly. This involves finding investors who have made wealth in real estate, studying how they did it and then copying their techniques. They’ve already put in the time testing the methods, so you dont have to.
Each investor may use a different technique in order to grow their wealth. Usually different techniques work in different circumstances, so your job is to pick the right technique for the right circumstance.
Picking The Net Worth Model
What you are worth financially is your net worth. Most people consider this to be the sum of your assets minus your liabilities. It’s a great way to make sure you are improving your financial situation over time. There are three basic concepts of the net worth model: First, know the flow of your money; Second, Budget, budget, budget, Third, Track you measure your net worth.
Part 1: Knowing how your money is flowing
This is an important concept. If you haven’t got a clue where your money is flowing, a couple of things can happen. One, you will unknowingly waste it on items that have no lasting value and prevent you from being able to invest that money in real estate. Two, you wont be setting aside money for future real estate investments.
When you figure out where your money is coming and going you can then choose to set aside specific money for investing in real estate and as you set aside that money little by little you can build your investments into great wealth. It does usually take some money of your own to create wealth. The only way to get legally usually is to earn it or receive it from your assets.
Since that average person isn’t lucky enough to start with a whole bunch of money, we have to work to earn the money to buy assets. When you make money, you have choices on what you are going to do with it.
You can spend it, which will prevent you from being able to invest it in real estate. You can choose to save the money, which is pretty risk free, but it wont do as much as you would like it to in terms of wealth building. You can donate the money which is nice, but even better when you’ve acquired some real wealth. Or, as we recommend, you can invest that money which will give you the best chance at having a comfortable financial future.
Once you’ve got all that figured out, you need to move on to part two which is budgeting. Most people consider this a tedious and even painful process, but it is crucial for you real estate investing success. If you don’t believe it, consider this: every single millionaire in the book The Millionaire Real Estate Investor admitted to having a personal budget in their interview.
Since we are trying to follow the example of those who have already created their real estate wealth, it’s obviously an important step for us. Planning for the future is an important step. We don’t want to ruin tomorrows future hope by wasting it today.
Once you’ve got your bugdet figured out, you’ll be able to move on to step three, which is keeping track of your net worth on a balance sheet. A balance sheet is a great tool for measuring your progress toward your desired financial future. On your balance sheet you will list your assets, liabilities, and net worth total. You’ll want to do this on a regular basis, say monthly, for example. This gives you instant feedback and helps you know what changes you need to make to improve your financial situation. You can see what liabilities are hurting the most and what assets are helping the most. You find that this tool really helps motivate you as well.
None of these concepts are too difficult, but they are important enough to determine your success in investing in real estate. Professional athletes practice their skills over and over again, and you too will need to do the same thing. Practice these techniques till they are 2nd nature for you and you will be well on your way to creating financial freedom for yourself through the power of real estate investing.
A powerful concept is simply to learn and practice the investment fundamentals that successful real estate investor are currently using. You’ll create a profitable real estate career that will benefit you and your family for years to come.
Tags: how to invest in real estate, investint in real estate, real estate investors
July 1st, 2008 at 12:50 am
Real estate investing is certainly one of the best ways to build up capital for the common man/woman.
July 12th, 2008 at 3:24 am
Very interesting blog, good content, enjoyed reading.