Investing In Real Estate 101
Real Estate in the form of a rental property or a family home is the single largest investment for most people. It has been identified as one of the safest and most reliable forms of investment over long a period of time. The downside is that it involves a high entry cost, a long investment period and relative unpredictability. The housing market can be precarious: either positive or negative. It is important to read and understand trends in the market in which you are investing.
When done properly, the housing market can be a lucrative and reliable way to generate income. It can create a consistent revenue stream while supplementing your portfolio with unique benefits including: tax advantages, appreciation potential, and portfolio diversification.
Investing in Real Estate
This is the buying, selling, leasing or ownership of land and/or structures sitting on it for the purpose of earning money.
It's generally broken down into three categories: commercial, residential and industrial.
- Commercial properties: these are properties used for business purposes. Commercial properties include business offices, restaurants, farmlands and apartment buildings.
- Residential homes: this consists of single-family homes, multiple family houses, condominiums, and townhouses.
- Industrial real estate: these are properties that serve an industrial purpose, they include: shipping/storage warehouses, factories, and power plants.
There are 3 different ways of making money in real estates investment:
1) Interest from loans: this is an arrangement whereby an investor lends money to a developer and profits from interest. This investment is suitable because it provides regular cash flow to an investor. A loan is a type of “passive income” source used by private equity firms and real estate's investment trusts (REITs), etc.
2) Appreciation: owning a piece of land allows an investor a chance to profit from the equity earned over time at the time of sale. A property’s potential to earn equity represents the value the investor may realize when the property is sold or refinanced, but this is where the preponderance of risk lies - in knowing the answer to that question.
3) Rent: owning property allows an investor to earn profit by leasing. Rental income can be a good source of revenue but carries with it a good deal of risk, as well. Prudent real estate investors often acquire the services of a trustworthy property management company to handle the ongoing operations of the home as a rental property.
Buying a Home
Buying a home is a big commitment and therefore, should not be rushed. In order to reassure yourself of getting a good buy or investment, it helps to perform a lot of due diligence and research. A good Realtor should be able to assist you in much of this, but it never hurts to educate yourself along the way.
From choosing the right home to coming up with a payment method, you want to get things right. Your Realtor can help with this. Don’t buy a home because everybody is doing it. Buy a home because you need to settle down and you can actually afford to pay for it.
Sell a Home
What about when it comes time to sell? Are you thinking about selling your home now? In some ways, selling a home can be more difficult than buying one. As a seller, there are various facts you must provide to the buyer, and depending on your local or state laws, there may be certain timelines you must adhere to, as well as certain disclosures you must legally make to the seller.
Failing to perform a legally required duty can leave you open to lawsuit long after the home sale closes, and this is one time where hiring a Realtor can really help keep a home-seller out of trouble. In addition to simply knowing how to sell a home, a Realtor has to be able to keep his or her clients protected, in as much as possible, from unwanted repercussions that arise after the home is sold.
Not only does the home need to be attractive, clean, shown in it’s “best light”, it must also be marketed correctly and properly. A variety of “old school” sales practices, such as print advertising and “open houses” are considered obsolete in the industry, and by engaging in such practices, a seller is only spinning his or her own wheels.
The internet has changed the world and how real estate is bought and sold, and continues to evolve even to this very day. The guidance of your professional Realtor can make the difference between a smooth and pleasant experience versus one that comes back to haunt you.
When selling the homeowner should focus on doing everything possible to make the house attractive. In some cases, it’s best to sell a home completely empty and clean, so the buyer can see exactly what they are getting. In other cases, when the homeowner still needs to live in the home, staging can help make your lived-in house look like a temporary model home for the time it takes to capture your buyer.
Preparing the home should involve cleaning, decluttering, and making necessary obvious repairs. The goal is to make the best first impression on everyone who walks in the door, and sometimes the window of opportunity for this can be limited, so make each day count. Consult a reputable Realtor to assist you with the process.
Real Estate's has a track record of strong performance. It offers a chance to earn remarkable returns and diversify your portfolio. When managed prudently it can be an invaluable source of cash flow.