How to Invest in Real Estate

With the bust in the housing bubble and all the foreclosures, real estate investment might just be the best place to bank your money! Don't let the housing bubble burst deter you. The fact that there are so many properties to choose from right now and that too at relatively throw-away prices, land investment might just sound like a good investment decision right now. As it is, one tends to hold a property for a long period, and hence you may also consider it as a pretty good retirement planning to sell the property later!

Property Investment

If invested correctly, your real estate investment will earn a lot and provide a good source of income for many years. A few things have to be kept in mind while investing in real estate. A real estate investment decision has to be well-thought out. It may be a good idea to invest in a newly developing area. The land can be purchased quite cheaply and the rent in these places will always go higher.

The Good Old-Fashioned Real Estate Investment
Real estate investment can be done in two ways. If you have funds lying idle in your bank account, it may be a wise decision to buy property with those funds. This way you make a one time expenditure and earn a rent over the period for which you hold the land. You might also sell it off later, if you think the price is right and you are earning a good enough profit. The other slightly risky way of property investment is to get external real estate financing from banks. You can then rent it out to someone at a slightly higher rate than what you pay as mortgage. This way I consider to be risky because if you are unable to find a tenant for your land, you have the risk of not earning anything on your investment, and furthermore paying a mortgage.

Real Estate Investment Groups
Being a landlord has its share of problems. Since the ownership is yours, the problems that come with it are also inescapable. Tenants come in all types. Some might default on payments, some might cause some breakage in the house. You may cut it out from their initial deposit, but fixing it is still your headache, right? Not, if you go for a real estate investment group.

A real estate investment group can be considered as the mutual fund amongst real estate investments. Such a real estate investment group builds apartments and condos and then invites people to invest in them. So instead of taking a loan from a bank, investors will pay the mortgages to the real estate investment group, while it takes care of all the maintenance issues themselves. Of course for this service, they may charge you a percentage of the rent you receive.

Real Estate Trading/Flipping
This type of investment is suitable for the adventurous among us. Flipping is where an investor buys property in a low-priced area, but where the demand looks like it is going to pick up. The investor does not buy the property with an intention to rent it, but to resell it after a few months when the price picks up. He might not choose to wait for the best price, and might sell it when he feels that he has made enough profit on the land. It is a very risky proposition because if the investor is not able to sell the land, he will end up making a huge loss.

Author: Arjun Kulkarni