4 Reasons Entrepreneurs Should Diversify into Real Estate
Entrepreneurs are go getters. They take risk and venture out on dreams to create a better world. There is much reward for entrepreneurs, but also a huge downside. Real estate investing for an Entrepreneur can offer a more stable diverse portfolio to improve their long term goals.
There are real estate entrepreneurs, however we are not addressing those entrepreneurs here. Obviously a real estate entrepreneur is going to have investments into real estate. What about the tech entrepreneur that is building apps for various customers, or their own app that changes the world. Why should an entrepreneur be allocating a certain percentage of revenue to real estate investing?
Let's look at the top 4 reasons to do so;
Real Estate is a fixed asset that is growing in value. Even a 1% growth per year is great. There are years that the growth will exceed the 1%, and some markets that offer greater returns. Don't lose sight of the purpose here. The entrepreneur has a business to run and time to invest into a growing business. Spending too much time on the real estate investment is short sighted. We want an asset that will be there in 20 years, so minimal growth is acceptable. It is also best to keep the investment into real estate around the corner. You can manage it, and keep your own eyes on it if necessary.
You will need to retire at some point, having a consistent income of $2,000 in today's money will help you do that. By holding onto the asset/s over the long term, you will be able to pay off the mortgage and own the asset outright. The rental income will give you a great retirement income throughout your retirement years.
Keep the real estate investment in the company's name. Not only does this make it easier for various present financial issues, however it offers collateral. As your company grows, and you need to take on debt, having collateral will make it easier for your company to obtain the extensions of credit. The more collateral a bank has for lines of credit or loans, the lower their risk. By reducing the banks risk, they can offer you better interest rates and more greater amounts of funds.
4. Forced Savings
As an entrepreneur, you may not have a traditional savings means afforded through many corporations to their employees. You are on your own, and while you may enjoy the freedom, you need to ensure that you follow strict habits. A required mortgage payment is will force the entrepreneur to make regular payments. Since your payments are paying off an asset, you should see them as payments into a savings account. Should you sell the asset in 30 years from now, you will receive your monthly payments back, and then some.
By investing on a small scale into real estate, an entrepreneur can effectively save for their retirement, grow their net value and improve their overall company's financial well being. Create relationships with realtors that are true professionals and will assist you make a wise investment. A good realtor will be your advocate and negotiate well with the sellers on your behalf. You are their ideal customer because as your company grows and you look for more properties, they will benefit in the long term.