Is Real Estate Investing Worth My Time?
How much could you be making from investing in real estate?
Are you curious to know how much you could and should be making from investing in real estate? Well, the first question I have for you is what type of real estate investment do you plan to engage in? Not all opportunities are created equal. There are some that are more lucrative than others, simply due to the nature of the project. Not to mention, there are all sorts of different types of real estate projects. These include all of the following and more:
Your profits depend on the many unique factors of your project – try benchmarking instead.
In reality, there’s no set percentage you can expect to earn. Beyond getting into the technical details and calculating the profitability of your project, you should consider benchmarking too. This is where you compare the profits generated by your current efforts to the potential profits earned if you focused your resources elsewhere. Basically you’re benchmarking your current earnings to an alternative course of action you may have taken. This way, you can decide whether your time is better spent on this project or the alternative.
Finding an alternative to use as a benchmark.
When you find an alternative investment to use as a benchmark, you should consider the amount of time and risk involved with your current real estate project. If you can find something similar, then that will provide a better comparison. For example, don’t compare your savings account interest rate to your current project. In reality, you don’t have to do anything with your savings since you just let your money sit there with hardly any risk involved – if any. So if you were to compare the rate of return from your savings account to your real estate project it would be skewed. Presumably, your savings interest rate would be extremely low, while your rate of return from real estate would be higher to some extent. This could lead you to believe that you are doing a good job, when really you haven’t formed a solid basis for comparison.
However, if you decided to compare real estate investing against a particular portfolio of bonds and stocks then it could be a better comparison on the basis of two conditions. The first being that it is relatively time consuming and second, if there is a similar level of risk involved (i.e., you could lose money or only break even). Or maybe, you compare it to the income you’d earn at a part-time or full-time job (depending on how busy your investments keep you).
By making this comparison, you will be able to better gauge whether your efforts are generating the results that alternative investment opportunities would. Now don’t think in any way that we are suggesting you get out of real estate investment. Maybe, as you’ve seen from the list above, you just need to try a new type of real estate investment. After all, if real estate investing was easy, then everyone would be millionaires from it. However, if you’re surpassing your benchmark then there is little concern about your profitability.
Takeaways from this article.
The bottom line is that you shouldn’t be afraid to test out different methods of real estate investing. Also, monitoring the performance of your profits will help you gauge your personal investment performance. Testing and monitoring can help you discover areas where you need to become more efficient, as well as where you are succeeding. Getting into the right frame of mind and being thoughtful about your investment progress is a key to success.
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