Engineers are typically well-positioned to invest in real estate. Not only do engineers have higher-than-average earnings in a stable field with high growth potential, but they also have the analytical skills needed to evaluate potential deals and maximize return potential.
In this article, we’re going to explore how engineers invest in real estate. We’ll look at:
- The benefits of real estate investing for engineers,
- How your skillset is perfectly suited for real estate investing, and
- The best strategies for an engineer investing in real estate.
Whether your objective is to invest for lifelong freedom or build generational wealth, this guide to real estate investing for engineers will help you reach your goal.
Why Real Estate Investing Makes Sense for Engineers
Real estate investments provide several benefits for engineers, including:
- Long-term appreciation. The value of real estate increases over time.
- Cash flow potential. Rental properties generate passive income, which you can use to supplement your salary, reinvest for portfolio growth, or even live on in retirement.
- Forced appreciation opportunities. By adding value to your property, you can immediately increase its value. This gives you the option to sell for a profit or to increase rental rates.
- Tax benefits. Claiming deductions and depreciation reduces your tax burden, and capital gains are taxed at a lower rate than earned income.
- Flexibility. There are so many different ways to invest in real estate. For example, you could own a rental property, flip houses, or buy shares of real estate investment trusts (REITs). With so many options, there is bound to be a good fit for you. We’ll explore some of these options later in this article.
- Stability. Real estate is less volatile than the stock market. So if you’re uncomfortable with uncertainty, real estate investments are probably a better investment for you than corporate stocks.
- Low levels of risk. Most real estate investments are lower-risk than other investment classes. Whether you’re risk-averse, or simply want to mitigate risk where possible, real estate is a good option.
Thinking Like an Engineer for Max Return Potential
As an engineer, you are uniquely qualified to invest in real estate.
Firstly, engineers are likely to earn high incomes. This makes it easier to qualify for financing, which you can leverage to build a real estate portfolio. Plus, because engineers are typically disciplined, using income responsibly to build a higher net worth over time. This unlocks high-net-worth investing strategies that are unavailable to the general public.
Secondly, your mind works differently from the average person’s, and that gives you inherent advantages when it comes to real estate investing. Here are just a few of your traits and skills that translate well into real estate investing:
- Data-driven decision making. You’re not going to allow emotion to override your objective analysis of a potential real estate investment.
- Efficiency. You know how to focus on the 20% of tasks and resources that will yield 80% of the results.
- Optimization. You know how to minimize waste and maximize profitability potential.
- Risk management. You’re probably not going to take unnecessary risks or expose yourself to liabilities.
- Tech experience. Whether your tech experience is limited to CAD or goes deep into software engineering and the development of machine learning models, you understand the benefits of leveraging tech solutions. With the future of real estate being built on tech and automation, this experience will serve you well as a real estate investor.
Best Real Estate Investing Options for Engineers
Here are seven of the best real estate investing options for engineers.
1. House Hacking
House hacking simply means generating rental income from your own home. This beginner-friendly real estate investing option is ideal for engineers who own a home and have a little space to spare. You could rent out an extra bedroom, convert a basement or attic into a rentable unit, or simply rent out your extra storage spaces.
2. Industrial Properties
Industrial properties, like warehouses, self-storage facilities, and manufacturing spaces can be a good investment for engineers because they are low maintenance. Single-tenant commercial spaces typically leave the improvements and customizations to the tenant. And because people don’t live on the property, there are fewer appliances for the property owner to maintain, and there is less wear-and-tear on systems like plumbing.
3. Residential Fix-and-Flips
Flipping houses can be an engaging investment option for engineers who want a project. You purchase a distressed property, renovate it, and then resell it for a profit. One of the big benefits of home flips is the short timeline. Some investors are hesitant to tie up funds in a long-term project. Flips allow you to get in and out of a deal in just 6-18 months.
4. Residential Rental Properties
Investing in rental property is a solid long-term strategy for engineers. You could start with a single-family home for simplicity. You would have just one unit to maintain and one household of tenants to manage. Alternatively, you could invest in a multi-family building, which instantly diversifies your real estate portfolio by providing multiple income streams, one from each unit.
Real Estate Investment Trusts (REITs) are companies that invest in income-producing real estate. By purchasing shares of a REIT, you can share in the proceeds earned by the properties the REIT owns. This is a strong option for busy engineers who want to invest their money, but not their time or energy, in real estate. It’s important to note that REIT investors have no control over the properties owned by the REIT. So if you prefer a higher level of control, a REIT might not work for you.
6. Real Estate Crowdfunding
Real estate crowdfunding is when multiple investors pool their money to fund a single real estate project. By pooling funds, investors get access to properties that would have been too expensive or too ambitious to tackle alone. The project is professionally managed by a real estate sponsor who reports back to the investors. With crowdfunding, you get the financial benefits of direct ownership without the high barriers to entry or hassle that can come from managing a real estate development yourself.
7. Real Estate Syndication
Real estate syndication takes crowdfunding to the next level. The basic model is the same, but syndication offers a more stable ownership structure, in which investors become members of the LLC that owns the property. This means you hold ownership rights to the underlying real estate. Furthermore, syndication projects are typically more transparent than crowdfunded projects. You’ll know the exact property you’re investing in, complete with the street address. You’ll also get to review the financial projections and compare them to the actual figures as the development progresses. This is ideal for engineers who want professionals to manage the project on their behalf, but also want access to the specific project data so they can confirm that their investments are performing as expected.
Why Engineers Invest with Gatsby
Gatsby Investment is a real estate syndication company with a real estate investing approach that mirrors the approach of an engineer. We use objective market data to drive decisions, leverage tech solutions to reduce overhead (whereby increasing profitability), and focus on optimizing each project for maximum return potential, while simultaneously mitigating any risk.