Investing in Real Estate
Real Estate Investing
The best investment on earth is earth. Louis J. Glickman.
This famous quote pretty much summarizes what real estate investing is all about. It is the vert most stable investment available today. The very basic notion of real estate investing is summarized as the process of buying a property for a low value, doing any necessary work to bring it up to date like renovations, remodelling or just basic management if it is an income property and then turning a profit. This can be done by selling the property or finding tenants to rent it.
Real estate investments are great ways to create income streams. You will need to place a relatively high amount of money to get a property and usually the more capital you invest the better the return will be. It is important to find the balance between what you will be paying for the mortgage, appreciation and income generated by your investment. Many people go into real estate investing and the mistake of not finding that balance. In the end they lose money. It is therefore imperative that you know your market and create a plan of how you are going to go about doing things. It is also very important to find a property that fits your plan. Searching for these properties can be difficult and time consuming and understanding how the market works problematic. Even though investing in real estate is appears to be something that almost anyone can do, it is not. You need specialized knowledge which most times comes with experience.
One of the decisions you will need to make after you decide you want to invest in real estate and before you buy anything is whether you should invest in residential or commercial. While there might be great commercial properties on the market at incredibly affordable prices you might want to consider the different taxes you will have to pay. While commercial properties are great, you will need to do your research and understand the commercial market in your area.
You will want to do extra research to determine the volatility of your potential income. For instance, if you are interested in investing in a multiplex then you should research what the rental market is like in that area. Whether you are going to have renters, what is the standard vacancy rate in that area and what are the rental rates are some questions you will need to answer. The same goes for commercial properties for businesses. Are new businesses being started and how often do they grow or go bust are also some key questions.
In general, these days real estate presents some attractive returns compared with money market funds or the stock market. Also, real estate also has a special attraction as a hard asset, which makes it valuable as a long-term hedge against inflation. A lower capitalization rate results in a higher property value and a higher capitalization rate results in a lower property value.
In other words, investing in real estate is particularly profitable in this time of economic downturn. Real estate has become a common investment choice along with stocks and bonds. Investing in real estate is usually a smart decision. Throughout the period of recession, there have been various banks that provided easy loans to its customers.
At the end of the day, real estate investments are too risky. The only way for you to minimize the risks is to do proper research and consult a professional real estate agent who knows the specific details of your local market and has a good track record. At the end of the day though, keep in mind that real estate investments have one major difference from other types of investments. You will have to deal with people, and that in some cases can lead to headaches.