Also referred to as real property, real estate basically implies a piece of land including anything affixed to it like buildings, fences etc. For a long time now real estate has been topping the favourites chart as a great investment opportunity that has a potential of yielding big profits.
Now before you get all excited to take the plunge into the real estate market; lets first understand the brass tracts of the game called real estate investment.
There are two principal means by which you can earn by investing in a real estate business namely resale and rental.
This kind of investment works in quite the same way as an investment in stocks does. You purchase a property and then put it up for sale at a price higher than the one that you paid for purchasing it. Therefore, you pocket the money that is the difference between the two costs. Usually, investors of such a scheme use the money they earned on a particular purchase to buy another property, which they further sell out and the process repeats itself.
But just like everything else in life a resale investment also has its share of pros and cons. Pros: a resale investment spells great profits. You may purchase a property that doesn’t require much repair work and then after making a few changes you can see the value of the property appreciate by a good margin. Cons: However, the flip side of a resale investment is that you may not find the appropriate buyer or the price for your property and you may end up blocking your money. Also, the housing market may crash, thus bringing down the cost of all the properties.
Another popular means of investing in the real estate business is by means of putting your money on a rental property.
In this kind of investment, the investor buys a property and then lets it out on rent. Although, through such an investment, an investor doesn’t get a lump sum return; yet it can serve as a means of long-term investment, thus yielding returns over a period of time.
The advantage of investing in a rental property is that it becomes a constant source of income for a long period of time. Moreover, if the need arises the investor can sell off the rental property and earn some good money. However, the disadvantage of a rental investment is that you will have to deal with all sorts of problems like tenants who do not pay their rents, or you may have to invest your money into repair work or you may even have to go through periods where your property remains unoccupied.
Both the methods have their share of positives and negatives. A real estate investment can be quite a gamble. It may either yield great monetary results or it may completely reduce you from riches to rags. So, before you venture into the world of real estate you must first assess your own financial status and your immunity to risk.