Buying real estate is a great investment option, yet, it’s also quite expensive and difficult to pull off. Sure, a lot of people do so by taking a loan that they’ll pay off after they fix and flip the place or use the rent to make monthly credit payments, however, even this is not as simple as it seems. First of all, you need to make a down payment, which will usually be between 10 and 20 percent of the property’s total value (if it’s industrial real estate, it could be as much as 35 percent). Second, there are numerous follow-up expenses of buying real-estate that have to be covered up-front and saving from them tends to be incredibly important. All in all, here are several savings tips that will help you handle this situation properly.
1. Know what you want
Investing in real estate is a broad term and it could mean a number of things. For instance, you might want to diversify your assets or create some additional income by investing in rental properties. You might have found a neighborhood that will undergo a boom in value in the nearest future, which means that investing in time might give you a chance to grow your wealth. Either way, by visualizing and defining your goals, you’ll make the necessary first step on this journey of a thousand miles.
2. Know how much money you need
Another issue that you need to tackle immediately is knowing the exact amount of money that you need to save. This is crucial for obvious reasons and by knowing how much money you need to save, as well as how much you can save per month/year, you’ll get an estimate of just how tangible your savings/investment goals are. You’ll also see if you’ll have to take some extra measures in order to get things done. All in all, budgeting is a mandatory first step.
3. Change your lifestyle
When it comes to saving for an investment in real estate, you need to keep in mind that the amount of money that you have to save needs to be a considerable sum. This means that you need to introduce a massive change to your lifestyle, not just in small expenses but in the way in which you approach spending money, as a whole. First of all, you need to shift your priorities from luxuries to accommodate yourself to investments that will create a return in the long run. In other words, no, you don’t need a new car now or in the next several years, what you have at the moment is more than suitable.
4. Saving is a priority
The next thing that matters is making saving a priority, which often requires you to adopt a new mindset. Saving needs to become a priority and just avoiding luxuries might not be enough. What you need to understand is the fact that investing in real estate is a financial plan that will pay itself off in years, not months or weeks. This means that you need to make a massive turn in the way in which you make your financial decisions.
5. The beginning of the month is crucial
When it comes to saving, the way in which you spend is often affected by the amount of money that you have. The privilege of having a full savings account will make you want to spend more, which is why the beginning of the month (or the period during which you’re receiving your salary) is pivotal in your saving process. As soon as the money gets deposited on your account, move it into your savings fund. Make a calculation of the amount you need to make it until your next salary and allocate everything else.
6. Diversify your investments
Sometimes, transferring all your money into a savings account won’t be the best of ideas. Even though you’ll save money, just by knowing that you can make a withdrawal at any moment might be too much temptation. Also, by making a deposit, you’ll miss out on an opportunity to use this money in order to make some additional funds. By investing in precious metals or other commodities (like diamonds), you can solve all of these issues.
Speaking of precious metals, investing in gold or silver aren’t your only options. This is especially true due to the fact that more and more people are deciding to invest in platinum. This metal is particularly reliable as an investment, due to the fact that it has a number of industrial appliances, meaning that its value won’t diminish anytime soon. For instance, platinum is often used as a catalyst for chemical reactions and it has wide use in both jewelry and automotive industry.
7. Start earning more
One of the most obvious and the most effective solutions is to simply start earning more. In the era of the internet, it’s quite easy to find a lucrative part-time job than it ever was before. Increasing your revenue in this manner is usually a must-do for all potential real estate investors. This can benefit you in one of two ways. First, it can allow you to save the same amount of money without having to give up any of the luxuries that we’ve previously mentioned. Second, it can give you a chance to reach your savings goal a lot sooner, thus helping you make an investment in question earlier than you’ve expected.
8. Improve your financial education
The last thing you need to consider doing is improving your financial knowledge by embarking on a course or finding reliable resources to learn from. Sure, this is an investment that won’t come free but it’s an investment that will more than pay itself off. Just think about how many unclaimed tax deductions are out there that you could add to your savings account, as well as how many financial opportunities you aren’t currently taking advantage of. By finding a way to learn more on this topic, you’ll find yourself in a scenario where you have more options than before.
All of the above-listed methods are quite effective and it’s recommended that you consider applying them all at the same time for maximum effect. Once you have the money you need, you’ll face the challenge of learning how to recognize the right real estate to invest in. This, however, is a story for another time.