Beginner's Guide to Real Estate Investing | Financial Buzz

Beginner’s Guide to Real Estate Investing

There is no denying that real estate is one of the oldest forms of investments and continues to be an evergreen asset that is likely to exist for several more decades, if not centuries. Since it tends to offer a massive ROI in most cases, people continue to love it to this date.

If you are new to real estate investment but want to get your feet wet, then you have come to the right place.

The Basics

All forms of real estate investments involve renting, flipping, or owing a property or land (commercial, residential, or industrial). However, the most popular option has to be residential properties as the people often buy townhomes, traditional homes, and condos in locations they feel have a lot of potential. Of course, it’s often easier said than done as there are many things to consider when you buy a condo or apartment irrespective of your confidence in a particular location.

Irrespective of the kind of real estate investment you pick, the following are the 4 main ways you can earn money from the same:

  1. Appreciation

If you are willing to wait, then it’s a good idea to buy a property whose value you think will increase over time. This growth in the financial value of a real estate asset is called “appreciation”.

When you buy an apartment or condo for appreciation benefits, then you can hold the property for many years and then sell it for profit when the time is perfect, i.e. when the return is maximum.

  1. Rent

You can earn a decent amount of stable income by renting a property to a family or students depending on the location and market conditions.  You can also find tenants easily by posting ads on classified websites like Locanto and Craigsist. However, make sure that you check out the local vacancy rates on the property you have in mind before proceeding.

  1. Interest

This option is generally used by real estate investment companies and private equity firms in light of the fact that the cost of ownership in the US continues to rise today. Under this, they offer loans to real estate developers and earn income based on the interest generated.

  1. Tax Benefits

When you invest in real estate, then you essentially become a business owner and qualify for tax benefits. For instance, if you have a home office, then you can avail home office tax deduction. You may also get tax benefits for the various supplies you need for property maintenance.

Things to Consider

Just like most kinds of investments, real estate has its share of risks. So, there are a few things that you need to learn if you want to put your money on the line. For instance, you need to know that investing in properties requires doing a lot of calculations, maintenance of your properties on a regular basis, and keeping tabs on the latest real estate trends. If you are going to offer your property for rent, then you should also be prepared to handle all kinds of tenants.

If you are willing to take responsibility for real estate investment, then make sure that you consider some of the main factors before you invest. For starters, you should choose the location carefully as that alone can change the outcome of your investment to a huge extent. You should also inspect the property carefully and consider the total cost of the repairs that you will need to perform in case there are any. Of course, one final but important thing that you want to look into is profitability i.e. how much you can expect to get out of the investment and whether it’s even worth putting any money in.

Real estate investment may sound challenging but in reality, it’s not so much. All you need to do is do your homework and fix a budget. Unlike other forms of investments like mutual funds and stocks, the real estate market isn’t that volatile, granted you pick the location carefully. So, don’t fret and just go for it. Good luck!