You'll often hear that loading up on stocks is a great way to become a millionaire. But that's not your only option.
Another solid means of growing wealth is to start investing in real estate. But you shouldn't expect to just snap your fingers and start generating millions on a whim. Becoming a wealthy real estate investor will require the right strategy.
Here are three important lessons to keep in mind if your goal is to generate wealth through a real estate portfolio.
1. Patience is key
Rarely do you hear stories of people striking it rich in the stock market overnight. The same holds true in real estate. In fact, it can take many years for properties to appreciate in value, so if you want to grow wealth with real estate, you need to be willing to give it time. That could mean holding the properties you buy for 15 years, 20 years, or even longer.
2. Diversification could be your ticket to success
Stock investors are often advised to assemble a diverse mix of investments. And that's good advice within the context of real estate, too.
Rather than focus on a single type of investment, you may want to branch out and try your luck with different types of properties. You could, for example, build a portfolio that consists of a few single-family homes and one multifamily building. Or you might put some money into residential real estate and the rest into commercial real estate.
3. You might have to take some risks along the way
There's no such thing as a risk-free investment. That applies to real estate as well.
Say you decide to load your portfolio with income properties. There's always the risk that one or two of those properties will end up sustaining costly damage from a tenant that you end up having to pay for. Or, you could have periods where your properties sit vacant for months on end due to diminished demand or new competition.
Plus, you never know how local laws might evolve over time. If you buy an income property with the hopes of renting it out on a short-term basis and your town decides to ban short-term rentals, you could wind up out of luck.
This isn't to say that these things are guaranteed to happen, but that if you invest in real estate, you might hit some snags along the way. And those snags could end up being costly. That's a risk you'll need to prepare for and make sure you're reasonably comfortable with.
Put yourself on the road to riches
It's more than possible to make a lot of money by investing in real estate. But it's also important to take a level-headed approach to that process. Becoming a real estate millionaire might take time, and it may involve a lot of research, planning, and critical thinking. But it's a goal you might very well manage to achieve in your lifetime if you play your cards right.