Real Estate Investing can be a difficult topic. However, we’ll keep it simple and easy to understand.
Why Invest In Real Estate?
Real estate is a good market to get into. If you know how to play your cards well and dance with the market trends, you could profit a good sum out of it. Market watchers are especially taking note of the current market flow. That’s because they think that it is one department where losses are quite many in recent years. If you are a patient investor, however, you must not be shaken of down markets.
Real estate makes for an attractive investment due to the following factors:
* A good rental yield. Realty investors have a promising future renting out their property to tenants and gaining from that kind of income steadily. Naturally, you will have to deal with the costs of maintenance, taxes, and mortgages as the landlord. Your tenant, meanwhile, will pay you a specific amount of rent for a specific period of time. In most cases, the rental fee is enough to cover the costs along with some profit. Then again, it would not be wise for a landlord to charge way too high because it will be a lose-lose situation for him in the end. The best way to earn from renting out a property is to be patient and charge an appropriate amount of rent.
* When you look at the trends you find that properties have gone up in value over a long period of time. This is one of the biggest attraction for many real estate investors. Some only buy real estate to enjoy gains from long term price increases in the property market.
* It is easy to start on this kind of investment. Doing business out of your own home is a good startup for real estate investors. Of course, it would be difficult to play up the market if you are putting your own comfort on the line. It is advisable, therefore, that real estate investors first own a home. After acquiring another property, you are set and ready to go for doing business in the real estate market.
* There’s no need to constantly watch how the market moves. In realty, there is no down or up moment. If you have enough patience, you have got good chances of earning profits from it. At one point, you may hear market watchers saying the real estate market is down. But then again, you will never know. What you need to equip yourself is a stock of common sense. Do not be too sure that you are getting a good deal when you buy a property for $300,000 and it used to worth about $450,000 years ago. You need to watch how the deal is made, what kind of deal you are making, and how you can earn from that kind of deal.
How to Invest in Real Estate
To invest in Real Estate you don’t necessarily have to buy a home. The easiest way to invest in Real Estate is by selecting a mutual fund called a REIT (Real Estate Investment Trust). All mutual funds should have at least one fund catering to Real Estate Investing. These investment trusts will invest money in apartment rental properties, townhouses, senior citizen homes, malls, university housing, commercial real estate and home developments among many others. A REIT is very popular with folks who don’t want to own property outright. It gives you an alternative and flexibility toward investing without buying a home. A REIT pays out approximately 90% of their earnings in dividends to shareholders on a quarterly basis. Everyone should own a REIT as part of your investment portfolio. However, one should be cautious during these bad economic times. One thing is for sure though, real estate is a hard asset and it’s an excellent way to keep your money safe for the long term. Also remember that you can live in your home.
Real Estate is currently in the rebound stage and it all depends on where you live. Currently California, Nevada, Florida went through some really hard times. You have to remember that these places sky rocketed based on speculation not sound investment principles. A lot of folks bought homes by taking out the equity of their current home in anticipation of making a profit (flip)or gamble on a second home. After a while some of these folks started to get burned since the buyers were not credit worthy. The banks just started giving money away and people started to buy at any price since banks continued to feed the bubble in this case the sub- prime borrower. The market, however, will thrive again so do some research and invest wisely.
Below we will cover some popular ways to invest in RE, but please do your homework and don’t jump right in. Do research in your own local communities before venturing out. Your own local real estate market is a good way to evaluate current market conditions. Look at the job situation first. Jobs is the main driver in any RE market. Without jobs people can’t afford to buy or rent homes. Look at the current Detroit Michigan problem with the three big automakers. Detroit’s housing market can significantly tank if these folks are not bailed out.
Fix and Flip
Fix and flip is a money making strategy where you buy a house, fix it up and then sell it a short time later for profit. This is an excellent way to make money, but it only seems to work in a bull real estate market. I would not take a chance at flipping properties during bad economic times. Although real estate investing can affect local communities differently, I would not take a chance. There are different ways to play the real market in ways that can help you sleep at night. However, keep your eyes always peeled for opportunities. The best way is to ask a local real estate agent about the current housing situation. You can also easily find out what the last three homes were sold for in your local community. This information is public or just ask the real estate agent. I’m sure they’ll be willing to work with you since they’ll try to get whatever business they can get so offering information to you might benefit them in the long run.
A distressed property is a home that is in poor physical condition that will need substantial repairs, but you can find priced much lower than market value. Certain fix and flips can be considered a distressed properties, but I think the repairs are greater. Again, this is a strategy that you will not want to get into when the real estate market is down. Always, check neighborhoods to see if houses are selling fast or how long they’ve been sitting on the market. Remember that everything is related to supply and demand. If there is no huge demand for houses because buyers are lacking, you will not want to get into these types of properties for investing. Consider another strategy, but always keep your eyes on the neighborhood.
Let’s say you buy a house or an apartment, make minor repairs, paint it, fix the windows and plumbing. Then you to rent it since it’s a down real estate market. You want to make sure that your rental will cover the mortgage, taxes and insurance. If you clear all those expenses and still have, let’s say $150.00 extra in positive cash flow then that’s considered an income property. This is a good way to make some extra cash while you build equity on your property. This has a huge advantage since your interest on the loan is tax deductible. Not only are you making a positive cash flow every month, but come tax time you get the opportunity to get a little extra back from the tax man. Look for good solid neighborhoods where young professionals might be looking for a place. If you can’t do it alone, get a trusty friend or a family to join you. Again, the same principal applies, real estate is a local market so see if there are good deals out there. Most people may want to rent instead of buying a home during down real estate markets. You may also want to check local laws because if you tenant loses her job and can’t pay the rent you might not be able to evict her legally so again do your homework before taking the plunge.
We also cover tax liens on this site where homeowners are not able to pay their taxes and the county has a sale on the house. There are so many strategies that one can use. We just have to learn about them, do your research and then pull the trigger. Don’t be afraid, you can do it.