An Idiot’s Guide to Choosing Real Estate Property Investment
Real estate property investment involves purchase of real estate with intention of making a profit. The profit can be made in two ways. One is by renting out the property. The profit is accrued slowly. The other way is to buy a property and resell it in the same condition or after developing it. Here is a guide for a complete stranger to this business to start real estate property investment.
Investment in rental property. You may buy a property and rent it out to a tenant. The tenant is obliged to pay the rent to you. Being the real owner of the property you are liable to pay the mortgage, pay all the taxes due and make all the repairs and maintenance necessary. The landlord takes all these expenses into account when he/she decides on the rent. Of course, the profit element of the landlord is also included in the rent. In addition to the profit the landlord makes in rent, the value of the property also appreciates over the time. There are disadvantages for rental property.
If you do not get a tenant, you are left with paying the mortgage out of your pocket with no income on the investment. The precaution you have to take is to select the location of your housing investment where there is a high occupancy rate
For a rental property you have to do the maintenance. In addition to the normal maintenance, you have to attend to any complaint made by the tenant at any time of the day. The remedy for this is to hire the services of a person for this job.
Trading in real estate. In this trade, real estate is bought, held for a time and sold when the appropriate price is offered. Sometimes, improvements are also made on the property. The cost of improvement together with a profit is added to the value of the property. This type of investment takes a little longer to get returns. But the return is higher on investment. One major disadvantage is that you can trade only on one property at a time unless you have plenty of cash on hand to invest on several properties at a time. In a falling market in real estate you may be left with holding the property longer or selling it for a loss.
Property flipping. This is yet another type of trading in real estate. In flipping the investor buys a property and sells it at the earliest for a profit. The investor does not make any improvement in the property. In a booming property market the investor may hold it for a little while to maximize the profit. Another way of flipping is to enter into an agreement to buy the property and find a buyer immediately. Then transfer the property to the buyer. You can save on the expenses of transfer to you.
Real estate is a popular and reliable vehicle for investment if handled properly. With proper preparation you too can get involved in it and make a living out of it.
Want to Learn more about Flipping Houses? Download the Home Flipping Guide