Different Types Of Real Estate Investments

Different Types Of Real Estate Investments

Different Types of​ Real Estate Investments
The fastest growing commodity in​ the​ United States is​ real estate .​
In 2018, it​ increased in​ value by 12% compared to​ other goods and​ services that increased by only 4.5% .​
With such a​ high return on their investment, many people are purchasing real estate instead of​ stocks and​ bonds.
Some investors choose to​ invest in​ run down properties .​
They buy for​ a​ low price and​ hope to​ sell for​ a​ higher price once the​ necessary improvements to​ the​ house and​ yard are made .​
Many investors choose to​ do the​ repairs themselves, saving on labor costs .​
Others hire contractors to​ do the​ work .​
Either way, it​ is​ expected that the​ cost of​ repairing the​ home will increase its value .​
The new value is​ anticipated to​ exceed the​ original cost plus the​ cost of​ repairs .​
If the​ owner can rapidly sell the​ property, he/she can recoup their investment, make a​ profit and​ move on to​ another real estate purchase.
Other investors purchase properties that are vacant and​ require little repair to​ make them marketable .​
These houses can be resold or​ rented out .​
Here the​ owner has made the​ decision that the​ investment will be reimbursed over time .​
The monthly rent on the​ property must exceed the​ owner’s monthly payment on the​ loan .​
In the​ case of​ property rentals, the​ owner assumes responsibility for​ maintaining the​ property .​
He/she will act as​ the​ landlord, collect the​ monthly rent, make any necessary repairs, and​ handle the​ paperwork for​ obtaining tenants .​
If the​ owner does not have the​ time to​ invest in​ being the​ landlord, he/she can pay another person or​ real estate agency to​ act on his/her behalf .​
This saves the​ owner time and​ aggravation but it​ costs money to​ pay the​ substitute landlord a​ salary .​
This has to​ be figured into the​ rental price .​
Thus the​ monthly rent should be the​ monthly cost of​ the​ loan plus the​ monthly cost of​ maintaining the​ property plus the​ cost of​ the​ landlord plus a​ profit for​ the​ owner.
Sometimes an​ investor may choose to​ buy an​ apartment building or​ condominium complex and​ rent the​ individual units out .​
Here the​ formula for​ determining the​ monthly rent should be the​ monthly cost of​ the​ loan divided by the​ number of​ units for​ rent plus the​ monthly cost of​ maintaining the​ property plus the​ cost of​ a​ landlord plus a​ profit for​ the​ owner .​
If any units are vacant, the​ owner must make up the​ difference in​ the​ loan payment owed that month .​
This can be quite expensive if​ the​ units remain vacant over time or​ the​ number of​ vacant units grows in​ number.
There are times when the​ housing market has slid .​
This is​ called the​ bubble effect .​
Prices go up until, at​ last, they burst like a​ bubble and​ begin to​ decline .​
This can be a​ serious problem if​ you have all your money tied up in​ real estate .​
If you were depending on your new property to​ earn enough equity to​ make you a​ profit and​ the​ value of​ the​ property fails to​ increase or​ decreases, you may be in​ financial trouble .​
Make sure in​ advance that you can make your monthly payments .​
You should not depend entirely on the​ equity to​ make your payments .​
Financial experts suggest that, if​ you don’t have to​ sell the​ property and​ you can make the​ payments, don’t sell .​
Wait it​ out and​ see if​ property values rise again.
Financial experts say that an​ informed consumer will know what is​ happening in​ the​ market place and​ be prepared for​ it .​
Instead of​ borrowing again to​ meet the​ downturn in​ real estate, they recommend that you cut back on your expenses where you can .​
Use the​ extra money to​ step up payments and​ reduce the​ amount of​ the​ loan.

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