Real Estate Income vs Real Estate Wealth: What's the Difference?

Lets explore real estate income vs real estate wealth. Real estate wealth is not the same thing as making real estate income, but many investors are still mistaken. From our experience, we are seeing how different the two of them are. As an investor, it is important to know what kind of scope is best for you. This is why we are going to discuss both real estate income and wealth, what it is, the differences and similarities, how to make it, and what is best for you as an investor.

What Is Real Estate Income?

Real estate income refers to the present income being made from real estate. This can be in the form of cash flow from income properties, as well as profit from flipping and selling a property.

What Are the Ways of Making Real Estate Income?

Although there are many ways investors manage to make real estate income, here are two of the most common ways we are seeing investors utilize this profitable market:

  • Flipping Properties:
    • This is a common way real estate investors utilize the market to make real estate income. By flipping a house that was originally bought below market value and selling it when all the renovations are complete, many investors are able to pocket a couple of thousand dollars. Although, it is important to note that house flipping does come with its risks as it is hard to estimate what profits would look like.
  • Cash Flow From Rental Properties:
    • Good homes in good areas tend to build a good amount of cash flow for investors. This means the amount of profit gained from monthly rental payments from tenants.

Click here for a more detailed guide on how investors are making real estate income!

Where Should I Be Investing to Generate Real Estate Income?

Since we are talking about real estate income vs real estate wealth, when generating quick money from a flip, the main goal is being able to put the property back out on to the market and sell it as soon as possible. This, however, is sometimes difficult to do in areas with less demand. If you have a lot of money that is available and open for investment, Toronto is a great area with high demand.

The only thing to watch out for is the fact it is hard to find properties that a way below market value (that don’t require thousands of dollars worth of renovations). If your main worry is not getting the property sold as soon as possible, it can help to invest in a property that is always experiencing high demand. In that case you would be investing for real estate income vs real estate wealth.

Toronto is also a great place to invest in pre-construction condominiums. As there is constant growth and demand for Toronto, we continuously see growth from pre-construction condominiums.

Here at Rock Star, we offer a great class to members on buying, owning, and selling your pre-construction condo. Click here to save a spot for our live free training class to get more information on the preconstruction class as well as the 17 other classes we offer.

What Is Real Estate Wealth?

Building real estate wealth is a great way of building security and stability through real estate. In comparison to real estate income vs real estate wealth, wealth is built through home equity and appreciation of properties from a long term perspective.

This means that short term ownership and flipping is not the way to build wealth through real estate. This takes time as well as patients, but most investors see a massive return on investment by the time they decide to sell.

What Are the Ways of Making Real Estate Wealth?

There are so many ways of making real estate wealth, it really just depends on what is right for you and why we are discussing the topic of real estate income vs real estate wealth. Here are some great ways to make real estate wealth.

  • Flip and Hold:
    • For those who love those home renovation shows but don’t want to take on the burden or worry of selling it right after the renovations with a higher price tag, a great alternative is to complete some much-needed renovations on the property and rent it out.
    • This way, you are building home equity on the property, as well as letting the property appreciate in value so that when you sell it, you make much more than what you would have made listing it right after the renovations.
  • Rent to Own/Lease Contract:
    • This is a great way to get current tenants on the route to eventually purchase the property you currently own. This contract basically entails that the tenant has the option to, but with no obligation, to purchase the property they are residing in. The pricing is predetermined, and many landlords implement a sizable down payment to prevent the possibility on the tenant deciding to back out.
  • Long Term Rental Property:
    • This is the most common way investor build real estate wealth. Long term rentals entail both residential as well as commercial real estate. Not only does owning a property long term help to build home equity, but there are also tax benefits doing so.

Click here for a more detailed guide on how investors are making real estate wealth!

Where Should I Be Investing to Generate Real Estate Wealth?

When it comes to building long term wealth through home equity in real estate, there are so many places that are great opportunities in southern Ontario. With the GO rail expansion, we are seeing growth for areas that were previously considered undesirable. So when talking about real estate income vs real estate wealth, it is important to consider the latter.

With prices in the city increasing to an amount that is no longer considered affordable for most people, many commuters are moving away from the city more willingly. We are seeing just how much property prices are being affected by the GO rail expansion and see it as an opportunity to get ahead before the property prices skyrocket here just like they are in Toronto.

Click here to get access to our report discussing how the GO rail expansion and immigration will affect where people are living, so you as an investor can get access to a gold mine of information before others realize it’s there!

Additionally, there is a great article we wrote discussing the best places for real estate investment, where we talk about all of the cities in the greater horseshoe area that will be seeing constant growth for the next while. Additionally, we rank these cities based on population growth, infrastructure, job growth, and other important trends.

What Are the Main Differences in Real Estate Income vs Real Estate Wealth?

  • Doing vs Planning
    • Making real estate income, although it also includes some planning, mainly consists of doing. By this, we mean that there is a lot of action and quick changes that investors partake in.
    • Compared to real estate income, real estate wealth involves a lot longer-term planning. As long term investors plan on keeping properties for a long time, they need to make sure the areas and markets will work in their favor. This involves a lot of planning and forecasting, to help them make sure that nothing will go wrong in their investing journey.
  • Active vs Passive
    • A lot of short term investments that generate income from real estate are a type of active investment, especially with investments like flips. An active investment means that the investor will be busy and actively involved in this investment.
    • From the hiring, project management, sometimes the construction itself, an active investment can not only be mentally exhausting but physically too! In contrast, a passive investment generally takes the form of most long term investments.
    • This is where more money is generated by holding on to the property for a longer period of time. This not only helps build home equity but appreciation as well. This generally does not involve as much participation compared to active investments.
    • Passive investments to build wealth sometimes involve helping tenants with their needs, but this can always be handled by property managers, which makes this type of investment much easier. Go ahead, kick your feet up!
  • Instant vs Long Term
    • Real estate income generally involves short term ownership and cash flow. This is great for investors that love getting involved in the small details because they can see returns on their hard work almost instantly. Comparatively, trying to generate real estate wealth is generally more of a long term investment, where you let time and a great profitable market make you double or triple of what you originally invested.
  • Risky vs Safe(r)
    • Even though it is important to be knowledgeable about the market with any investment, short term investments generally require way more knowledge about the current market.

When you get down to it, it’s really about making instant income in a risky way or making long term income in a much safer way. Obviously, we suggest the latter, but really it comes down to what you as an investor are comfortable doing with your amount of experience and financial mobility.

What Are the Similarities Between Generating Wealth and Making Income?

  • Wanting More In Life:
    • Whether you want instant cash or you want to let it grow from appreciation, the main thing that is similar between making income and wealth is the drive to want more in life. This is a great start, and success can only be achieved by those who really want it! This drive is a great mindset to be in, it helps you learn better, make investments more efficiently, and generally make you more motivated as an investor.
  • Both Require Being Knowledgeable About The Market:
    • If you are flipping or you are planning on being a landlord for your long term investment, it is important to know how the market is doing. Some common questions about the market for those who are making income and wealth are:
      1. Is it a good time to buy a property?
      2. Is it a good time to sell a property?
      3. Is this property located in an area that is appreciating in value? How long will this trend continue?
  • Both Require Needing A Great Team
    • Real estate agents, contractors, property managers, tenant screening companies, mortgage brokers, banks, the list goes on and on. Even if you are planning a quick flip, chances are you will have interaction with so many people as well as companies.
    • This can be overwhelming to keep track of all the commotion that many don’t expect with real estate, and whether you are planning a short or long term ownership of a property, you will need to make sure you have people who are on your team.
    • This is why here at Rock Star, our members have access to our popular Rolodex, which has a directory of tried and true companies to help you with your real estate ventures. We’re here to help make your life easier and help you live life on your terms.

How Do I Know What Is a Good Option For Me Right Now?

When it comes to making income and wealth in real estate, the main factor to consider is patience. Some new investors come in hoping and expecting to make thousands instantly. Most of these investors also get disappointed when they realize that’s not how this market works.

If you are handy, some investors remodel houses for flipping so they can quickly put it back on the market to make a couple extra thousand in their pocket. This requires a lot of work though, and if you did not guess the market correctly, there are chances you can even lose money with a flip.

To be able to flip a house successfully, you need to make sure you buy the property below market value. But remember that you get what you pay for. If you are seeing a really low price that’s probably because the property really needs to be fixed up! Not only will this take a lot of time to fix up the property, but money as well.

If you consider yourself a more patient person with the ability to invest some money in a long term investment, building wealth is a great idea. Although this money won’t come instantly, this is a great way to let time help with the appreciation of your property and build wealth through home equity.

 

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