A real estate investor is a person who buys, sells, and rents properties for the purpose of profit. Real estate is a quite lucrative business as the rate of properties goes up every few years. Of course, like every other investment, real estate also comes with risk. Without proper knowledge and experience, one cannot make it big.
What makes real-estate so lucrative is, unlike stocks, you can buy properties by paying a percentage of the total value. Depending upon the property and state, this percentage can be 25, 15, or even 5. With this small percentage, they can sign the papers and pay the rest of the value with interest. This gives real-estate buyers the power to call a property their own, without paying even half of the payment. You can buy a property, live in it for a few years, and move. You can do this multiple times. All you need is a reliable long-distance mover to take your stuff to your new place.
Real-estate investment can truly make you rich if you play by the rules and take calculative risks. But before that, let’s understand the pre-requisites.
What makes a good real estate investor?
- Financial Analysis
Financial Analysis is crucial in real estate. You won’t secure a profit all the time so you must know where to put your money. You should be able to manage your finances in such a way that you can bear consecutive losses. Maintaining an emergency fund is a great way to do that.
- Research Ability (about a location)
You’ll need to research a location. You need to figure out the population, employment rate, mortgage. Many factors play a part in selling a property. These include rent prices in a locality, property prices, the opportunity for construction and renovation. It all comes down to how much does the market appreciates real estate. You must be able to calculate this data before making a good decision of buying and selling a property.
- Real Estate Network
The network is important no matter what field you work in. People buy and sell based on referrals all the time. To achieve that, you be in the good books of other investors. In real estate, you can’t do everything on your own. There will be debts and losses when you’ll need financial support. A good network helps you out when you’re taking risks. It’s basically a cushion to fall back on.
Different ways you can invest in real-estate
Real estate investments generally result in profit. The prices of real estate have consistently gone up from 1975, with few dips in between that quickly rose. The greatest dip was during the financial crises and the pandering but the real estate market is not recovering.
- Rental properties
A simple way to make money on real estate is by giving properties on rent. This is a great idea as the property will still be yours but you’ll make money every month. The prices depend on you, although it’s wise to set it up as per your competitors around you. It’s a great idea for those who’re looking for a monthly income through real estate but there are disadvantages too. Tenants may damage the property that needs instant renovation which requires money. Also, one be ready on vacant months.
- Real Estate Investment Trusts (REITs)
REITs are formalized trusts that use investors’ money to buy assets and distribute 90% of their profit as dividends. It’s much like buying stocks and it’s highly liquid as the investor can cash out money any time. These allow a regular person to have investments in commercial properties like malls.
- Online Real Estate Platforms
These are cool for small-time investors. It’s basically like crowdfunding where people pool their money together to form a bigger amount that’s used to purchase real estate. When it’s sold for a profit, it’s distributed amongst the investors. Here one can invest low amounts to this is a great way to practice real estate investment without actually buying a property.
- House Flipping
House flipping is the most popular way of investing in real estate. One buys a property, spends money in fixing that, and resells the property for profit. It’s simple and the profit depends on the skills of the investor. One has to have a sense of where to spend money on. If you spend too much on renovating the property, you might lose profit. Renovate the house depending on the locality, which can be posh or average.
Real estate investment is an amazing option to make money. With the opportunity to buy a property without having to pay for it, you can truly build an empire. The basics stay the same — analyze the location and take calculated risks. Over time, you can build generational wealth with real estate.