Real estate investing has become a lucrative vehicle for building wealth over the long term. At the same time, buying and managing real estate is much more complex than learning to invest in the stock market. Let’s look at how you can use real estate as an investment.

 

Rental Properties

One of the oldest forms of real estate investing happens when someone buys a property and rents it out to someone else. The owner must take care of the property and pay the expenses associated with the property.

The idea is to charge enough rent that nothing comes out-of-pocket. While you could charge more and make a profit, most only set the rent equal to costs. Instead, they wait until the mortgage is paid to start making a profit.

A secondary benefit is to have a property which increases in value over time. This allows you to sell it for a nice profit at any time.

Of course, you may end up with a bad tenant who damages the property or not be able to get a tenant, leaving you with the expenses. You must find the right property and e in an area where vacancy isn’t a problem.

 

Real Estate Investment Groups

Real estate investment groups allow you to enjoy the benefits of being a landlord without all of the work. You can join a company which buys a set of condos or apartments, and you can purchase one or more. The company which operates the group manages all of the units, including leasing and handling maintenance. While this is a safe option for beginners, you must research groups to ensure you find a reputable one.

 

Real Estate Trading

Trading real estate is the other side of real estate investing, and appeals to a unique style of investor. In this transaction, the investor purchases a property with the plan to sell in just a few months for a profit. It’s also known as flipping a property. Contrary to popular thought, a flipper won’t put money into the property, instead allowing it to sit and gain value. The second type of flipper buys the property with the idea of improving it to sell for more.

 

REITs

A real estate investment trust or REIT occurs when the investor gives his money to a corporation to purchase properties for income. They are bought and sold just like any other stock. The profits are paid in dividends. This allows investors to earn a steady income.

 

Leverage

One of the appealing aspects of real estate investing is the ability to spend only a fraction of the money required in the form of a down payment to purchase a property and sell it at a profit or rent it out for income.

 

Within each of these options for investing are many different variations. Real estate is filled with potential, but it also comes with risk. Every potential investor must weigh the pros and cons before making a decision.

 

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