Monday, June 22, 2020

Investing in Real Estate

Investing in real estate is more like an old profession. I remember my parents used to buy cheap land and then they sell it after a few years for a higher price. Some people would also borrow money from a lender and then eventually settle to pay them back with a land title since they don't have any cash available. 

Photo from Pixabay

I would also receive offers from friends to sell a property (house and lot) and then they told me it's up to me how much I wanted to add on top of the property's selling price so it got me to thinking that real estate can be pretty lucrative and generates substantial returns for both short and long term depending on how much time and effort you would render for it.

What is Real Estate Investing

According to Investopedia, investment real estate is real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence while the others are used to generate rental income and profits through price appreciation. 

Ways to Invest in Real Estate

  1. Loan interest payments. A real estate loan, also referred to as mortgage,  is an arrangement where investors lend money to a real estate developer and earn money from interest payments on the principal of the loan. This type of real estate investment has potential for regular cash flow. It is also less risky than equity because it is lower in the capital stack. A potential downside is that it can be secured or unsecured with collateral.  Debt investing can provide regular cash flow for an investor. Depending on the number of lenders, there can be one or several types of debt within the capital stack of a loan.  
  2. Rental Payments. This type of real estate investment also has potential for regular cash flow. It requires equity ownership and hands-on management. You really have to delegate yourself with this. This one is very common nowadays in our area. I see a lot of 3 or 4-story buildings being built in our community and then once the building is done, I would see a sign that says "For rent." Months later, I would see parlors or convenience stores renting the spaces for lease. So thinking if I were the land and building owner, I would have a steady income knowing that these the lessees would pay me monthly for their space. It's probably not the best investment now because of the COVID-19 crisis, but once it disappears, rental business would be back in the game.   
  3. Appreciation. Potential lump sum return when asset is sold. The appreciation, or increase in the value of a property over time, represents the potential profit available to an investor when that property is sold. Unlike debt investments or rental income, a sale provides one large, single return.

So there it is, folks. If you really want to learn more like seriously learn in-depth about real estate, you may consult real estate experts like Ron Legrand Net Worth so you can have an idea about where to begin. 

Related Posts Plugin for WordPress, Blogger...