It’s a known fact that real estate is one of the oldest and most well-founded financial advices in the books. Few other assets can compete with real estate’s vast array of benefits, including tax advantages, appreciation, relative impunity to market shifts, and even the potential for passive income.
MoneyMindz.com, Best On-Call Financial Advisory Portal is giving a clear idea about this commonly popular financial product, ‘Real Estate’. At first it can be really difficult to invest in real estate as even a modest home usually requires a substantial down payment, and it can take years to save up those five-figure sums. The term “real estate investor” may bring to mind a multi-millionaire who manages several different properties; leaving you feeling overwhelmed enough to give up the ghost entirely.
Types of Real Estate Investments
Residential properties are probably the ones you’re most familiar with, and are exactly what they sound like: buildings used by individuals and families as residential living spaces. These properties include single-family homes, duplexes, apartments, condominiums, and townhouses, as well as multi-family homes (so long as they’re being used residentially and don’t exceed four units).
Commercial properties are those used to conduct business, and may include offices, storefronts, retail spaces, farmland, and large multi-family houses or apartment buildings.
Industrial properties serve industrial business purposes, such as factories, power plants, or storage and shipping warehouses.
Furthermore, there are both active and passive forms of real estate investment.
Active real estate investment is, well, active — it requires a good deal of time, energy, and commitment from the investor. Active real estate investment may become a part- or even full-time job for the investor, who usually shares ownership with few (or no) other people and thus bears a lot of responsibility for the success of the investment.
Passive real estate investment, on the other hand, allows the investor to reap the benefits of investing without taking on the pressure and responsibility of full ownership of a tangible property. In most cases, passive real estate investments involve supplying capital to a larger investment pool and earning capital gains on loan interest through dividends paid to shareholders.
We’ll go into it all of this in more detail in a few minutes, including specific ways you can invest in real estate, both active and passive.
How Real Estate Investments Can Help You Earn?
- Rental income: Chances are, you’ve had to pay rent to a landlord at some point in your life. Well, if you become the landlord, someone’s paying you the rent — and so long as that rental price eclipses your total expenses, including your mortgage and maintenance costs, the rest is profit.
- Sale profit:This one’s fairly straightforward. If you purchase a home with the intention to fix it up and sell it down the line — also known as “house flipping” — the difference between your sale cost and your purchase cost (minus all the expenses put into maintenance and improvements) is pure profit.
- Loan interest: The interest charged on home and property loans can increase the value of investments made through REITs, real estate investment platforms, and private equity firms.
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