Real estate is an entity that you can physically touch and feel. It’s a tangible good and therefore, for many investors it is absolute. For many decades this investment type has generated consistent wealth and long-term appreciation for many all over the world. Depending on the area of your real estate, you can enjoy a profitable return on your investment.
There are two main types of real estate: commercial and residential. While other types exist such as; land, industrial, agriculture, and special purpose such as Churches. Real estate generally falls into the main two categories of commercial and residential. Making a profit in real estate isn’t as routine. Many people take the “house flipping” route searching for distressed properties, refurbishing them and selling them for a profit. Others look for properties that can be rented to generate a consistent residual income.
Generally, a down payment of up to 20% of the purchase price can be made, and the rest can be financed through a mortgage. Obtaining a mortgage to purchase a home provides you leverage, meaning that you can invest in different types of properties with less money down. By doing this, it assists by building your net worth or income that you could make off the properties. While this can be incredibly assuring, if this leverage is used incorrectly, you may owe more on the properties that they are worth. Thus, it is important to critically evaluate the terms and conditions of your loan and budget wisely.
Advantages and possible disadvantages of Investing in Real Estate.
There are many rewarding benefits to investing in real estate. This includes depreciation (writing off wear and tear of a commercial property), tax deductions and you can sell the property through what is known as a 1031 exchange and you will not have to pay capital gains taxes if you invest the money into a similar kind of property type.
Like all investments, real estate also has its drawbacks. When investing a property or any type of investment, make sure this is the type of investment is for you. Real estate investing is an incredible way to have residual long-term investment for your retirement or an additional way of income. With long-term investing of any kind especially in real estate, it takes time and a few years to see your return of investment.
Taking the time and having the patience in investing in real estate has the huge potential for profitable returns in your pockets. Additionally, real estate prices tend to fluctuate. While long-term prices generally increase, there are times when prices could go down or stay flat. Even with real estate fluctuating it is a proven long-term investment that is consistent and dependable.
Finally, it’s often hard to get diversified if investing in real estate. However, diversification is possible in real estate, if you have a variety of different types of property, then you will be able to expand in your realty investment. There is an additional way that you can be able to diversify in real estate through real estate investment trust (REITs), under which you can purchase a trust that is invested in a large portfolio of real estate and will off you a dividend as a shareholder. Now that you have a little bit more knowledge in investing, you can contact a professional real estate agent to help you with your realty investment.