Real Estate

May 7th 2016

Overview

The term "real estate" refers to natural resources and permanent buildings on a parcel of land. Commercial real estate includes property that is available for business activity, including office buildings, shopping malls, and stores. Residential real estate refers to the property available for housing and rentals, including homes and apartment buildings.

Most investors are able to make a substantial amount of money from their real estate. Especially in economically viable areas, the price of property tends to increase over time. You can buy property at a certain value and then sell it years later. When done strategically, real estate investments can even earn profits that exceed hundreds of thousands of dollars. Property owners who do not wish to sell property can choose to rent the property. Landlords are able to find demand among commercial and residential tenants.

In general, property is a safe investment option. The rate of depreciation of real estate property is lower in comparison to other fixed assets. A permanent structure that is in poor shape can also undergo renovations to increase its value. Normally, areas will witness rising property values over time. Over a period of time, a property investment will yield maximum returns with minimal risk.

How it Works

Real estate investors will use multiple strategies to yield a profit. Many investors prefer a technique called flipping, which entails purchasing a rundown property for the purpose of renovating, improving, and then selling it. Other property owners may choose to use their commercial or residential property for rental income. You can continue to own the property and rent it out for as long as you would like.

Real estate investment trust funds (REIT) are purchased like stock for the purpose of generating returns through dividends and appreciating values. REITs receive special tax considerations since they generate high yields. You can invest in an REIT by purchasing shares directly or by working through a broker or mutual fund.

Benefits

A diverse investment portfolio is beneficial for people who are trying to save money in the long term. Real estate is comparatively safe and can yield high profits over time.

This type of investment can also help property owners generate additional revenue as landlords. Some people become full time landlords, and others use rental income to supplement their regular paychecks.

In general, all investments carry a potential for loss. The loss potential with real estate is minimal compared to loss potential from other investments such as futures and stocks. You can improve your property before you sell in order to generate more revenue, and you can even sell your property at a loss, if necessary.

Real estate investments can provide tax benefits since landlord can write off mortgage interests. Research your options before investing in property. Expect your investment to be long-term, and look for the right opportunities to build your wealth.

Cost/Pricing

To invest in real estate, you must have adequate capital to make your initial purpose. You should also expect to hold on to your investment for an extended period of time. You may choose to make minimum payments, or you may choose to pay off your property immediately.

Timing

The real estate market fluctuates periodically, and it is important to invest when prices are as low as possible. When you buy at a low point and sell at a high point, your property will yield maximum profits. Be wary, and look at long-term reports of the property values in that particular area.

You can read published studies, or you can make investment decisions based on your judgment. If you are unsure about whether you are ready to venture into the real estate market, you should consult a professional or broker. If you make your investment at the wrong place at the wrong time, you could actually end up losing money.

Companies/Industries

You can get an exhaustive list of real estate agents, property dealers, and brokers that provide multiple real estate services across the United States. If you choose to work with a professional, make sure that you do your research and select someone who makes you comfortable. An agent's primary objective is to sell property, and your best interest may not be a priority. Determine your needs, and do your background research before making a commitment to an agent.

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