Dabbling in Real Estate Investing: The 5 Key Takeaways

 

In the world of investing, there are many different avenues available for turning today’s money into tomorrow’s gain. There are many ways to do this, but investing in real estate is often considered. There are many reasons why an investor might be drawn to this option above all the other more traditional options such as investing in the stock market, mutual funds, retirement accounts.

No investment is ever an easy task. The investor is not only taking a certain amount of risk in assuming that the venture will prove profitable, but the investor must also acknowledge that there will be some level of work involved. It could be as challenging as doing all the research and work for themselves or researching to find someone who can assist and advise on engaging the investment opportunity. In California, you can Visit GlennGoldan.com specifically for support during the lending process. But if investing in real estate is an option, here are the two primary methods of investing in real estate:


Landlord

One method of investing in real estate is to purchase a property to rent it out to others. This method will require either a willingness to act in a possibly daily capacity as the landlord or to contract with someone to serve as the property manager. There are many tasks associated with the role of landlord, making this the most time-intensive option. When there’s a household emergency in the middle of the night, the landlord will get the first call. The benefit is realized when the rental proceeds can cover the mortgage cost, thereby benefiting the owner with the equity.

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House Flipper

House flippers seek to find undervalued properties due to ill-repair or cosmetic problems. Those negative issues impact the selling price. The flipper then makes a further investment of improving the property, aesthetics, or curb appeal to create a property that can sell at a more appropriate price point to surrounding homes. The difference between the selling price initially and then reselling price becomes profit to the investor.

1. Real Estate Historically Gains

Real estate often trades at a yield above U.S. Treasuries, making it an attractive option. It is very typical for real estate prices to experience sustained increases over time.

2. Diversified Portfolio

For those who are already engaging funds in other vehicles of investment, the real estate market offers the investor the opportunity to spread the investment across multiple areas of risk. Should one market experience a downturn, the other(s) may not.

3. Hedge Against Inflation

As various elements of an economy expand, rents are often driven higher. The value of the capital investment rises as the purchasing power is reduced, creating an equilibrium that most investments can’t offer. This can become a great method of protecting the investment against inflation.

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4. Leverage

In many areas of investing, the ownership is limited to the full-price purchase. You must have the total amount needed to purchase the asset. You only need a down payment with real estate to accept the mortgage and instantly control the asset.

5. No Total Losses

Once the real estate is titled to the investor, the value is credited to the investor. Unlike some investments, it’s infrequent to lose the entirety of the investment. There may be some possible reasons the value could decrease for a time, but very few scenarios where the investment is completely lost.

When it comes to investment, it’s essential to fully understand the available options, the associated risks, the expectations are for the investor, and the expected time frame the investment is required to mature. Investing is never a guarantee, only an opportunity for profit.

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