Real Estate Investment - Week 1
By.. "Venu Vankadhara, Real Estate Investor"
You may have heard about real estate investing from your friends, families OR HGTV shows like flip OR Flop, fixer upper, beachfront bargain hunt etc., it is one of the oldest and proven forms of investing; many millionaires are made in real estate. Perseverance is very important along with the location strategy in real estate investing to make profit. Only 3 parameters dictate real estate investing – LOCATION, LOCATION and LOCATION. Real estate is one of the asset classes that every investor should seriously consider adding to his or her portfolio for the cash flow, liquidity, profitability, and net worth characteristics as well as the diversification benefits it offers.
Different Types of Real estate investment strategies
Investing in Real Estate for passive rental income
The concept behind real estate investing is that the investor, also known as the landlord, acquires a piece of real property. He/she then finds someone who wants to live, known as a tenant, and they enter into an agreement. The tenant is granted access to the real estate, to use it under certain terms, for a specific length of time, and with certain restrictions. In exchange, the tenant pays rent for the use of the real estate. For many investors, this has a huge psychological advantage over investing in stocks as they can drive by the property; see it, touch it .If you are able to price your rental rates appropriately, you should enjoy 8 to 10% return (which is also called as positive cash flow) on your capital after accounting for the cost of the property, including reasonable depreciation reserves, property and income taxes, maintenance, insurance, and other related expenditures.
House flipping is when real estate investors buy homes, usually short sales/foreclosures, and then resell them quickly at a profit after upgrading the house. Without a doubt, flipping homes offer great risks, and great rewards. A house flipper must be prepared for the possibility that the home won’t sell right away. House flippers also have to make tough decisions, like whether to accept an offer that is less than they wanted, but still for a profit. If you can handle all of the ups and downs and you have an enthusiasm for fixing up and selling homes, then house flipping might be right for you.
Real estate wholesaling is selling a house quickly for a fee usually $5000 to $10,000 to another investor or a first time home buyer who is willing to rehab the property. A real estate wholesaler contracts with a seller, markets the home to his potential buyers, and then assigns the contract to the buyer. Wholesaling does not require a real estate license.
Crowd funding a new way for raising money for businesses, it gives an opportunity to an individual to invest in small to major commercial or residential real estate projects. He/she can invest in small amounts for a decent ROI.
Risks of Real Estate Investing
Like any other investment, real estate investment comes with risks but with proper planning, risks can be minimized. Real estate investing can help increase and diversify your income as long as you are consistently bringing in profit each month
Some people buy real estate expecting it to appreciate a lot over time. It can be risky to pay so much for a property that you’re losing money on an operating basis just because you think it will appreciate.
Each real estate investment strategy introduced above allows you to have a certain level of control over the situation but it also opens the door to some risk. Finding the right property and managing it well takes time, effort, and some money. Paying someone else to do it can cost even more. If you’re worried about tax liabilities and benefits, you may want to talk to a tax advisor to discuss your options and goals when it comes to real estate investing so you can make the best decision for your situation.
Some Final Thoughts on Real Estate Investing
Real Estate investment is a NOT a “get rich quick scheme”, think long term and invest wisely.
Of course, this is only the beginning. Real estate investing takes years of practice, experience, and exposure to truly appreciate, understand, and master. To provide one illustration, many inexperienced real estate investors go out and buy properties themselves. This is risky. Instead, they need to establish something like a limited liability company to buy the property, shielding them from personal catastrophe if something goes wrong. You get to the point where having operating agreements drafted becomes second nature. You may even decide to set up your own real estate holding company once your net worth is sufficiently large enough to justify the administration costs and efforts.
Next Week Topic: Top markets for investing in rental properties
"Venu Vankadhara, Real Estate Investor"
Disclaimer – This article is for information purpose only. All information presented here is accurate to the best of author’s knowledge. Vastavam.net and its undersigned are not liable for any misrepresentation on this web site or in any additional information given verbally or in writing relating to Vastavam.net. and its’ investments. It is the readers’ responsibility to verify all information given. Readers should consult their own legal, real estate and tax advisors about the suitability of real estate investment for their particular needs and situations