Investment in real estate is more than just buying a home. Most of the investors view their investment as major asset which can be used to draw high profits from future resale. Therefore they adopt cautious approach to avoid investment errs. But real estate investment is not just basic buying and selling, rather it is much broad. Ideally there are different methods of realty investment that can help the capitalizer to earn manifold. The article below is a compilation of some relevant ways of realty investment that goes beyond basic buying and owning a property.
Witnessing the graph, realty market has increasingly gained huge demand over 50 years of time and has evolved as common investment vehicle. Domestic as well as NRI’s both are paving their way to real estate investment with an intention to reap high benefits. But what are different paths which an investor can tread, let’s have a closer look.
Rent your property: – This practice is very old. Here investor will purchase the property to rent it out to the tenants. From now the tenant will be responsible for paying the rent of the property which can be used for meeting out mortgage expenses, taxes and other basic costs. Basically landlord charges enough rent to meet the overhead cost and generate monthly profits but fundamental strategy is to be patient to charge rent that just meets basic expenses until fullmortgage amount is paid.Don’t be greedy to draw high returns instead let it go slow. Once all the mortgage amount is paid you have all the rent as your profit, moreover the appreciated capital value also adds to your revenue and helps in producing high returns on resale.
There is no such ideal investment possible but you can make sagacious choices to buy a property in the area where vacancy rates are low and people want house on rent.
Real estate investment groups: –If you wish to escape from monthly hassles of rent collection, maintenance and other issues, then real estate investment groups is the ideal solution for you. Real estate groups are like mutual fund investments.They are companies who build or buy set of apartments, condos and other commercial places and will reach out to the prospective buyers. They operate to manage all important activities as in property maintenance, interviewing tenants and advertising vacant units. In return they charge small percent of total rent amount.
There are several forms of real estate investment group but in standard version, the lease is in investor’s name and all the units’pool to a portion of rent amount which ensures that you as the actual owner gain enough to repay your mortgage even if your unit is vacant.
Realty Trading: – This is entirely different breed of investors. Unique to traditional buying and renting practice these real estate traders purchase property with intent to hold it for couple of months and further resell it to earn benefits. This technique is called flipping. Most of the property traders buy properties that are undervalued or are located in hot property market.
Besides above advantages, realty trading also has certain disadvantages. Flipping is short term cash investment but there are times when flipper is unable to resell the property which entitles him to bear the mortgage cost.Remember, if you don’t have enough cash to bear these unplanned expenses then real estate trading can be devastating. As a trader you need to offload the property as soon as it price rises else you might be exposed to heavy losses.