The real estate business is more than just dealing in properties, it is about finding people homes, helping people start their business or assisting people build an investment portfolio; in other words it is about helping others realise their dreams. When you are investing in something as important and lucrative as this, it is important to know exactly what kind of options are available to you so that you can make a better, more informed choice.
In this article we will briefly introduce you to real estate investment and go through the 5 basic ways you can invest in property.
Real estate trading is a fairly simple practice. Basically an investor will buy a property with the intention of holding it for only a certain period of time and selling it later once the value of the property has appreciated. When the investor can sell the property is dependent on his or her own goals and the situation of the market. Real estate trading means the properties are not held for long periods since the investor does not plan to pay any long term mortgage.
2. Rental Properties
The concept of land-ownership for personal use has evolved centuries ago into the tenancy system as well. The concept is simple; a person will buy a property, becoming its owner and then rent out that property to a tenant. The owner of the property or the landlord is responsible for paying the mortgage, taxes and costs of maintaining the property and the tenant pays the landlord for use of the property.
A landlord will charge a certain sum as rent which they use to pay for the mortgage and maintenance and a little more in order to produce a monthly profit.
A Real Estate Investment Trust (REIT) is made when a corporation (or a trust) uses money from investors to purchase and operate income properties. REITs are similar to stocks, in the sense that they are bought and sold on the major exchanges. REITs are a solid investment option for investors who are looking for a regular income and they allow people to invest into non-residential properties like malls or office buildings as well.
Real estate gives an investor one tool that not many other types of investments can give, that is leverage. From an investment standpoint, leverage means to use borrowed money in order to increase the potential return of investment of an asset, in this case a property.
Conventional mortgages require a buyer to pay only a fraction of the total cost of a property which means you can control the entire property and the equity it holds and only need pay a fraction of the total amount when you buy. The property is now yours to live in or rent out even though you have not paid for it in totality.
5. Crowd-funded Real Estate
A rather new form of investment in the real estate business, crowd-funding is basically when a group of people or in this case investors, pool in their money and share the profits later. While the concept of crowd-funding is not exactly new, what makes it different from similar concepts is that deals can be advertised online and are limited to accredited investors. A major benefit of a good crowd-funding platform is that they do a lot of research with due diligence, making sure that only the best deals get through.
In this article we went through 5 simple ways you can invest in real estate; however there is still much more to real estate investing, far more than what can be covered in one article. Nevertheless we hope that this article will help you as a kind of introduction to real estate investment and give you a basic idea about what to do to begin your investment plans.
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