How to Invest in Real Estate
There are three main factors that govern real estate investment. The secret of success in real estate and especially in town houses and co operatives, is to take in to consideration all three factors. Merely buying a property based on its location does not guarantee results. There is more than the location to consider.
Before investing, consider these factors:
• The area
• The perception of the area
• The economics of the area
Benefits of Investment in Real Estate
Although the values of properties in different parts of the country have shown variations, generally real estate investments tend to show higher rates of return than the interest rates that are charged by mortgage lenders. What this means is that, as an investor you can use rental money to invest in a piece of real estate, and be assured that in the long term, your property will yield more than the cost of financing it. Also, investments in real estate offer you greater control than investments in stock etc. As a real estate investor, you are also assured of several tax advantages.
Disadvantage of Real Estate Investment
The biggest disadvantage of an investment in real estate is the slow liquidity. Say for instance, that you have a number of listed stocks. All you have to do when you need funds is to call your stock broker. He will sell the stock, and you will receive the cash almost immediately. With a real estate investment however, you may have to wait a while to get the price you desire. If you need cash immediately, you may be forced to sell the property at a lower price than you had in mind. Even then, you can still raise some cash by re-financing your property.
Investment in real estate is also very expensive. Careful consideration and professional guidance is needed before making an investment. You have to take into consideration a number of facts backed by a solid knowledge of real estate and the factors that affect the market place. Besides, real estate investment needs active management. You can manage it yourself, although it is always advisable to hire the services of a professional real estate manager. You may need to make physical enhancements to make the property profitable. A lack of proper management is one of the reasons why many good real estate investments go bad. Lastly, there is always an element of risk in a real estate investment. There is always the chance that your property will decrease in value. It might also not yield enough income to make it really profitable.
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