Over the years, real estate has been a key driver in improving the financial positions for many people. It has evolved from owning homes to a growth in other income generating opportunities. Contrary to common belief, investing in real estate is not a reserve for the affluent. Small capital investment is a good place to start for those who are looking for an alternative to stock investing or mutual funds.
Real Estate Basics
To many, real estate is about home acquisition. However, the aspect of generating income from the purchased properties is where best to set your targets. The choices range from being a landlord to a farmer or housing an office building. The choices vary depending on your choice as an investor. A careful analysis ought to be done on the amount required as capital as well as the revenue projections. After all, your investment should be profitable.
Trends show an upsurge of investment numbers in the real estate sector as opposed to the securities and bonds market. The property market is able to generate a substantial passive income that more often than not, has less hustles in keeping up with the market changes.
Popular Ways for Investing In Real Estate
The following are the basic start positions for the small capital investors or start investors that are a sure growth platforms on your investment portfolio.
1) Rental Properties
This investment avenue, has you as the landlord, earning rental income from your tenant. The rental rates should be reasonable but enough to take care of the costs of maintaining the property and offering a tidy profit margin. Some of the costs you may have to deal with include property taxes, mortgage payments, and property maintenance costs.
Landlords who manage their own property have to deal with more responsibilities in handling their properties. If you consider this a hustle, there is always an option of hiring a property manager whose sole work is saving you the headache of dealing with the tenants.
2) Real Estate Trading
Under this category of real estate investors, more emphasis is on a buy-and–hold scenario as opposed to the buy-and–rent situation. This means that acquisition of property is meant for a hold in a short period of time and selling them thereafter at a profit. This techniques is referred to as flipping property.
There are two categories of flippers. The first deals with the short-term hold of property and as such, there are no improvements done to the property. Long-term flippers form the second category and they do consider making necessary renovations that would increase the value of their properties.
3) Real Estate Investment Groups
In the real estate business, these groups compare to mutual funds in the money markets. The companies buy the property and manage the same on behalf of the clients. The company takes the active management role in the property and charges a service fee to the client, in which it is a deductible percentage of the monthly rental income.
4) Real Estate Investment Trust (REITs)
REITs are created when a company uses funds from its pool of investors to purchase and manage income properties. The investments are bought like any other trading securities but are however meant to pay 90 percent of their taxable earnings as dividends.
When it comes to other companies, they pay the tax obligation, then they decide on whether or not they are going to make a dividend payout.
Reasons Why You Should Invest In Real Estate
With proper guidance and market analysis, real estate proves to give a boost to any investment portfolio. Whether it is an investment to generate passive income or the main source of revenue, real estate offers great diversity. This is especially good to any investor in situations of economic slumps in other markets. When compared to other investment opportunities, inflationary situations are transferred down to the tenants in form of a rent increase, and thus the rent income available for the landlord, is maintained.
Real estate is a growing market and the investment opportunities are diverse. Whatever the capital injection, with the right help from professional realtors, the returns are evidence of a worthwhile investment in the sector.
Thanks to Andrew Altman from SlickBucks.com for this blog post!