How to Invest in Real Estate

Don’t let the housing bubble burst deter you. The fact that there are so many properties to choose from right now and that too at relatively throw-away prices, buying a property might just be the perfect investment decision. As it is, one tends to hold a property for a longer period, so you can consider it from a retirement planning perspective as well. It may also be a good idea to invest in a newly-developing area, since the land can be purchased quite cheaply and the rent in these places will always go higher in the future.

The Good Old-Fashioned Way

Real estate investment can be done in two ways. If you have funds lying idle in your bank account, it may be a wise decision to buy a property using them. This way, you make a one-time expenditure and earn a rent over the period for which you hold the land. You can also sell it off later, if you think the price is right and you are earning a good-enough profit. The other, more riskier way is to get external real estate financing from banks. You can then rent it out to someone at a slightly higher price than what you pay as mortgage. On the flip side, if you are unable to find a tenant for your land, you run the risk of a dead investment and a mortgage.

Real Estate Investment Groups

Being a landlord has its share of problems. A tenant might default on payments or cause some damage to the property. In such a case, you can deduct it from their initial deposit, but fixing it is still your headache, right? Not, if you go for a real estate investment group.

A real estate investment group can be considered as the mutual fund amongst real estate investments. This group builds apartments or condos and then sells them to investors as rental properties. So, instead of taking a loan from a bank, you pay the mortgages to the group which takes care of all the maintenance issues. Of course, for this service, they may charge you a percentage of the rent you receive.

Real Estate Trading/Flipping

This type of investment is suitable for the adventurous among us. Trading or flipping is where an investor buys property in a low-priced area, but when the demand looks like it’s going to pick up. The intention is to resell it in the short term when the price goes up. He might not choose to wait for the best price, and might sell it when he feels that he has got a good return. This is a very risky proposition, due to market price fluctuations in the short term, and it is only advised if you have surplus funds in your account.

Remember, if made wisely, investment in real estate might just be the smartest thing you do in your lifetime.