Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular over the last 50 years and has is now a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. Many people have made millions investing in real estate.
Basic Rental Properties
To do this, you have to purchase a house that has a combined monthly mortgage payment, home insurance payment, and property tax payment lower than the rent the property commands. There are several ways to do this, from buying in an area with high rents, to putting a lot of money down so that your mortgage payment is low. There are two downsides to owing a rental property directly. First, it typically requires a lot of cash up front, from the down payment to the maintenance required. You really need to assess whether your return on investment will be worth it. The second major downside of real estate is dealing with tenants. You’ll need to screen renters before letting them move in.
Real Estate Investment Groups
People spend their lives learning how to analyze and negotiate real estate deals. Real estate investment is no different than stock investing or any other opportunity with huge returns with a whole industry of analysts competing for deals. By forming a real estate investment group with other investors. There’s different forms your investment club can take from actually pooling your money to buy properties to just talking about how to find rental investments. The common bond in all real estate investing groups is that you help each other compete against the big money players to get the best returns. Real estate investment groups benefit by bringing together different people that can all bring their expertise including investment analysts, accountants, lawyers, negotiating and closing specialists, and contractors.
Real Estate Trading
Simply put, trading in real estate is acting on behalf of a consumer to buy or sell real property, which includes land and any dwellings attached to or included with the land, such as houses, apartment buildings, condominiums, commercial space and mobile homes. Trading also includes commercial leasing and commercial property management. Trading does not include residential leasing and property management, selling time shares, businesses without land (like a mobile food truck), business equipment not including land (like hair salon furnishings), facilitating a new construction on already owned land and trailers or mini homes without land.
REITs, or real estate investment trusts, allow you to invest in real estate without the physical real estate. Often compared to mutual funds, they’re companies that own commercial real estate such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, which makes them a good investment in retirement. Investors who don’t need or want the regular income can automatically reinvest those dividends to grow their investment further.
The easiest way to access leverage is to use your own money. In the case of a mortgage, a standard 20% down payment gets you 100% of the house in which you want to live. Some financing programs let you put even less money down. If you are purchasing the property as an investment, you may be in a position where your partners furnish some (or even all) of the money. Similarly, some sellers are willing to finance some of the purchase price of the property they wish to sell. Under such an arrangement, you can purchase a property with little money down and, in some cases, no money down at all.