Before you begin real estate investing you need to be aware of the risks and "quirks" .
Are you new to real estate investing? It is important that you know the risks involved as well as the “quirks” to the business. Read the article below to find out what the “quirks” and risks are so you will be prepared.
Real estate investing is all about committing some personal funds on a specific property with the goal of creating income by having capital appreciation, leases or rentals. The term real estate generally refers to properties considered immovable like land with all the fixtures erected or attached to it like buildings or apartments. Once a person starts to enter the world of real estate, he will be required to handle some set of elements like the transferring and controlling of rights and possessions.
Understanding the turns and quirks of this aspect of business is very important because it engages some long-term and substantial investments on the part of the investor. Moreover, it is good for beginners in this field to assume that real estate market is highly dynamic and unpredictable. Being ready for this quirk is needed when an individual decides to start buying buildings or estate investing. Moreover, there are different methods in which an investor can engage in the real estate market.
The first type of real estate invest is through rentals. Individuals can decide to participate in this business with the goal of having a tenant rent the property they own. Through this method, the landlord earns money continuously from the renters through they are still subject in managing the payment of taxes, mortgage, and other costs for maintaining the property. Capital appreciation or the increasing of value of the rent of the property through time is also a benefit that the landlord can acquire. A risk of this kind of real estate is when the owner of the property can’t find any possible tenants. This will lead to negative monthly cash flows because of all the maintenance and mortgage payments. As compared to possessing some bonds and stocks, this area of investing needs time, effort, and patience from the part of the landlord.
Other kinds of real estate invest are trading, investment groups, and investment trusts. In trading, the owners are just required to manage their properties for only a short period of time like less than four months and concentrates to sell them within that time range. Another term for this can also be ‘flipping properties’ which is all about having to purchase significant popular and undervalued properties. It is up to the landlords if they want to invest some money into maintenance and improvement of their possessions before putting it on sale again. Investment groups, on the other hand, are more like small mutual funds and are all about setting up rental properties.
This involves a landlord owning some units and a professional company managing, acquiring, and building out the units with some percentage of the monthly rent going to them. Investment trusts, lastly, is a corporation that focuses on real estate investing. They have some trades on major exchanges and use the money of their investors to operate and acquire their possessions. Some benefits of this kind of investing is continuous income, exposure of the investors to non-residential investments, and the rule of the distribution of the 90% of the taxable income to shareholders through dividends.
Article by Chris B. Jenkins