We have all seen people making fortunes by investing in the stock markets and at the same time millionaires turning into paupers. This rarely does happen with real estate investing. There are living examples among us that some of us may or may not be aware of. A good example is the properties we inherit. The values of these have been growing all these years with appreciation annually. The investment was made years ago. Over the years the increase in the property value is the returns that we are benefiting from these days.
A Real Estate is a piece of land with all its natural resources and more often than not contains a building of some sort. You can take any type of building that is either a constructed or a manufactured property, however an immovable property is always permanently affixed to the land.
Why The Rush To Invest In Real Estate?
– Falling stock market has generated fear psychosis among the investment community reminding them of the Great Depression.
– Failing pension system with growing inflation has added to the woes of the retirees and employees.
– Lower interest rates have compelled the money to be diverted somewhere else for higher returns.
– Moreover banks are willing to extend loans for the purchase of land and buildings at lower interest rates.
How Lucrative Is The Real Estate Business?
Real estate has wide options for making money; one being to buy and either hold it or rent it. Likewise other benefits are:
– With the rents from the tenants continuous cash flow is guaranteed.
– Mortgage loans from banks help in buying with or without personal investment.
– In case of mortgage loans, the cash flow by way of rents will continually reduce the principal borrowed.
– Improvement of the locality will in turn increase the value of the property overtime.
Statistics reveal that housing is a low risk investment. Gauging by the market trend the average market value of the homes has risen by 50% in the past 10 years. The wealth earned from the real estate investment has surpassed that of the stock market returns indicating the faith of the investors in real estate. This is a sign of an upward trend in the days to come.
Haven’t we all heard of our neighbors making big bucks in real estate very often? Every now and then we see some one selling off a home or a real estate property in a week or two of buying it for a big profit. Every one of you, like I, must have thought real estate is where quick money is. But is the market quite so? Can anyone make quick money by investing in real estate? Unfortunately, it is not quite so, although we rarely, if ever, hear people losing money in real estate investment.
Making quick money is something that takes a lot of preparation and planning before investment, when you are invested and when selling or closing the deal. Further more, the investment amount is not small too, which no one can ignore. A slight mistake in prediction or a change in the legislation concerning real estate property or tourism or industry sector has the potential to turn over the whole real estate economy on its head resulting in wiping out of your capital too.
Any real estate broker would vouch for this fact. Take a scenario, for example. These brokers, in addition to brokering deals, also enter into contracts with sellers for selling off their property by making a down payment, which obligates them to sell at higher than the contracted price. Federal housing loan rates have revised now and there prevails a real estate slump, which is unforeseen. Wealthy brokers can wait till turn around of the market and still make a profit but they are still tied down by the blocked money. The case will be worse for smaller players with this condition.
Similarly, speculative investors are either forced to sell at loss or wait for unknown periods of times. The burden of interest you have to pay if you invested borrowed money might eat into your capital too, if the slump prolongs.
Unlike in stock and shares investment arena, you don’t have enough instruments in real estate to spread your risks and investment. All is fine when market booms but tough gets the going when things go awry. Lesson: longer you are invested better will be the return; no room for quick money, in general.