Real Estate is one of the most stable industries you’ll find as an investment option. Today, I’ll show you how to start investing in real estate as quickly as possible.
Before we do that, let’s first understand what an investment is.
Investment is the commitment of an asset for future returns. An investment is meant to attain value over time, it requires sacrificing the present for the future.
Investment for the present may include time, asset, money or efforts which are meant to yield results in the future. According to finance, the sole aim of investment is to generate returns on the investment ( ROI).
These Returns can be profit or loss depending on what the investment yields from the sale of the property, unrealized capital appreciation or depreciation, income such as dividends, rentals, currency gains, or losses due to changes in foreign currency exchange rate.
There are two types of investment mainly Low risk and High-risk investment. It is a known fact that the high-risk investment as the name implies, has a higher chance of risk and returns, while the low-risk investment has a lower chance of risk with low returns.
When a high-risk investment is made, investors generally expect a high returns on investment but when a low-risk investment is made, investors already know better to expect a lower returns on investment.
Investors understand the risk involved and so they spread the risk by having multiple investments. Investing in real estate is one of the most recommended way of investing and only those who are aware of the returns and less risk are bold enough to take up the opportunity.
Real Estate is a property that is made up of land and buildings on it, with other natural resources attached to it, It also means real or physical assets.
To businessmen, real estate refers to the act of producing, buying, and selling properties and lands with any structure on them, for instance, a building is known as improved land. The term used to describe a land without any form of structure on it is called unimproved land.
Anyone who is involved in buying and selling a home is involved in real estate investment. One of the primary ways investors can make money in real estate is by becoming the landlord of a rental property.
However, there are a few ways one can invest in real estate and get profitable returns on investment. They include;
This is one of the most popular ways to make money in real estate. This method requires individuals who are willing to renovate the property and also be patient with tenants.
This method requires so much capital for renovation and covering up for the period where the property may be vacant. Although, it’s a means of providing regular income and properties tend to appreciate over time, it is also very tedious, especially the aspect of managing tenants.
At the event of having a bad tenant, you may end up with damaged properties. Also if you have any vacancy on the property, reduced income is inevitable.
Real Estate Investment Groups
This method of investing is meant for those who want to invest in real estate but have a problem running or managing it. These Real Estate Investment Groups are like mutual funds that have investment in real estate.
Here a company buys or builds a block of flats or apartment, then allows investors to purchase them through same company. The company takes charge of managing these properties.
A single investor can own more than one block of apartment, the company in charge of the investment group manages all the units of the group, handles maintenance on the properties, advertises vacancy, and interacts with tenants.
The company is entitled to a certain percentage of the monthly rent in exchange for carrying out its managerial tasks.
The good thing about Real Estate Investment Groups is that the investor can receive some income even if he has an empty or vacant unit. This method of investing in real estate provides income and appreciation.
This method of real estate investment is for experienced investors who have basic experience in real estate market evaluation, marketing and renovation. This approach requires large capital, and the ability and willingness to renovate or oversee renovation and repairs when the need arises.
House flipping is seen as the “wild side” of real estate investment. House flipping is very distinct from buy and rent real estate investors. House flippers buy an undervalued property and look out for ways to profitably sell off the property in less than six months.
House Flippers don’t invest in improving properties, they invest in properties that already has an intrinsic value and has a tendency to be profitable within a short period of time.
Flippers who are not able to sell off a property as quick as possible always find themselves in trouble and may incur losses.
Another set of Flippers engage in buying the properties at reasonable prices, then proceed to add value to the property by proper renovation. This is usually a long-term investment and investors can afford to only take on one or two properties at the same time.
House flipping ties up capital for a short period and offers quick returns on investment. However, it requires an investor with deep market knowledge and not a beginner.
One disadvantage of House flipping is that the market which has been initially analyzed as hot by real estate market analyst, can suddenly go cold, this can lead to a continued snowballing loss.
Real Estate Online Platforms
Technology has made it easier for everyone to have an alternative source of income. Online platforms for almost every monetary activities are springing up everyday.
Investing in real estate is now so easy that anyone interested in investing in real estate can join others to invest in bigger commercial deals. Through this process, you can pull in funds with others and then Invest in a property.
This process can be likened to crowdfunding and can give an investor the opportunity to invest in a single project or portfolio of projects with a little sum of money as capital.
A critical study of the above-listed points can give you an idea of how to begin your real estate investment journey. Real Estate is in a distinct class of it’s own, no wonder experts advice prospective investors to make real estate a part of their well-diversified portfolio.
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Also read about 10 reasons why investments could change the course of your career