The overall goal when investing in real estate is purchasing a property that allows an investor to put their money to work today as well watching it grow over the years. Most people gravitate towards real estate for its appearance of ease, in basic terms it an agreed upon exchange between a property owner and a property user. Whether investing in residential, commercial, industrial or REITs investors dive into real estate knowing that they have to make enough return to cover the risk that is being taken when purchasing the property, the taxes that are paid on the property and all the costs of owning the investment.
Buying a Real Estate Investment
Most investors don’t purchase real estate investments out right in their own name for many substantial liability reasons. It is more likely that investors will purchase property through limited liability companies or limited partnerships to protect their personal assets if the investment isn’t profitable. One of the most appealing parts of real estate is its use of leverage. Many people make use of mortgages when investing in real estate by taking on debt against the property. With the use of leverage, it allows investors to control and outright own a property and it’s equities by only paying up front a small percentage of the overall cost.
Making Money in Real Estate
There are many different myths and tricks of the trade that individual investors follow when investing their assets into the real estate market, but there are four basic ways that most investors stand by.
Cash flow income: This is one of the most common ways investors see returns on their real estate investments. Investors in a general sense purchase a building with the intention of generating cash in the form of rent. The most common investments that generate money this way are apartment buildings, rental houses and office buildings.
Real Estate Related Income: This is an income that is based off of commission as well as percentage profits. More often then not, its income that is generated by the real estate brokers making the deals to buy or sell properties for the investors. Another form of real estate related income is generated through management companies, that make a profit by taking care of day to day tasks required by the building and in return receiving a percentage of the investments overall profits.
Appreciation: This is when a property increases in value due to a shift in the market, or circumstances surrounding the building. This can be due to the area the property is in being upgraded or becoming more prominent to upgrades that were done to the building. This is a little bit riskier of a way to generate profit due to that fact that its circumstantial on the market and the area.
Ancillary Investment Income: This form of revenue is derived from implementing mini-businesses into the real estate investment allowing the investor to make money off of the semi-captive collection of customers. The most common are vending machines and laundry services.
Types of Real Estate Investments
-Real Estate Trading
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