Investment in real estates tips and risks
Investment in real estate has a potential of earning huge profit. In this article, there are all possible ways of investment in real estate with the benefits and risks involved in the real estate investment.
From the last fifty years, investment in real estates has developed as a major investment option for the investors. Real estate investment is totally a different affair than other investment options. What does real estate investment means?
Most of the people are not aware about the concept of real estate investment. In general, investment in the real estate involves the acquisition of an immovable property such as land and everything permanently attached to it such as a home or shop. The main aim of acquisition of the immovable property is to generate a healthy and fix amount of earning from it. Although a real estate market has huge potential of earning but investment in the real estate is slightly more risky and complicated than other investment options. It is highly advisable to attain the full knowledge of all the aspects of investment in the real estate before putting your hard earned money in the real estate market. How to invest in real estate?
After getting the knowledge of real estate the next question comes to the mind of investor is that how to invest in the real estate to gain the maximum profit? There are several ways of investment in the real estate. Let me explain each and every possible way of investment in the real estate.Investment in real estate through basic rental properties
This is the most common and widely popular meaning of real estate investment. In this kind of investment, a person buys a shop or home and rent it out to a tenant. The owner or the landlord is responsible for the maintenance of the property. All the taxes and mortgage are also paid by the owner himself. The landlord charges a fix amount of the rental from the tenant to cover all his inputs on the property and to still gain a reasonable amount of profit.
There is always a significant amount of risk that you may come across through a bad tenant who damages your property. This may result in the negative cash flow. There should be a thorough probe of the tenant before renting your property to avoid the unnecessary damage to it.Investment in real estate through real estate investment groups
A real estate investment group is a solution for all those who want to invest in the real estate but don't want to take the pain of a landlord. In this system, a company or builder develop a set of apartment blocks and then allow the investors to buy them. You can own as much apartments as much you can.
The company who sell the apartments take the whole responsibility of the maintenance and renting the apartments to the tenants. In lieu for this management, company charges you a small amount of rent earned from your apartment.Investment in real estate through real estate trading
The real estate trade is totally a different affair than the buy and rent type of investment in the real estate. Real estate trader buys a property in an area where the possibility of increasing the value of the property is quite high. After holding the property for a shorter duration of time, the real estate trader sells the property when he finds the right value of his property.
Real estate trading is also called the flipping process. Generally, it offers huge profit to the investor but there is always remain a risk of holding of the property. True property flippers don't make any investment in the renovation of the property and sells it as it is in the market.Investment in the real estate through real estate investment trusts
A real estate investment trust (REIT) is a corporation which uses the investor's money to buy and sell the properties. REIT must pay out its 90% of its taxable profits in the form of dividends to hold the status of the trust. Just like any other stock REITs are also bought and sold in the major exchanges.
Similar to the other regular dividend paying stocks, REITs are also a great option for the investment for those who seek regular income after investments.Risks involved in the investment in the real estate
Investment in the real estate involves certain risk factors which should be studied thoroughly before the investment in the real estate.
1. Market decline- There is a fair amount of risk that after investing the money in real estate, there might be a decline in the market. Investor should make detailed survey of the market trends before making any sort of investment of real estate.
2. Proper planning of the Tax payment- Your purchase and sale of the property should be planned properly to save the hefty amount of taxes. Hefty tax sometimes can make undue pressure on the pockets of the investors.
3. Destruction of the property by the tenant- This is the major risk factor involved in the investment in the real estate. All the expenses of the destruction of the property is paid by the landlord himself. Landlord should investigate the tenant carefully and should hire experienced property managers.
4. Fraud in the sale of property- Investor should verify the ownership before making any huge investment in the real estate. There are many cases of the fraud sale of the property by the people.
Conclusion
This is just an overview of the various prospects of the investment in the real estate. As I stated earlier, investment in the real state has a fair amount of risk factors involved in it. So it is always advisable that investor should make thorough research of the market before planning any sort of investment in the real estate.