Real Estate Investments: A Beginner's Guide to Investing
The popularity of real estate investments has been steadily increasing in recent years. This type of investment has become a common investment vehicle and has proven to be an avenue for creating wealth.
While the real estate market brings about many opportunities, purchasing and owning a property entails a lot of hard work. To get you started, here's a quick look at three types of real estate investments.
2 Types of Real Estate Investments
Direct real estate – residential. Regarded as the old practice of land ownership, this type of real estate investment involves buying a property and having it rented by a tenant. The owner (or landlord) receives rental income, whilst taking care of the taxes, property maintenance costs and any associated mortgage. The landlord will often aim to ensure the rental return is enough to pay all the required costs, however this will depend on purchase price, rental return and the amount of borrowing against the property..
Real Estate Investment Trusts (REIT’s). A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges like a stock. REITs provide investors with an extremely liquid stake in real estate. They receive special tax considerations and typically offer high dividend yields.
Why Real Estate is a Smart Investment
Should I buy an investment property? It obviously depends on your individual situation however the simple answer is yes.
It may sound intimidating especially if you're new to the real estate world. However there are a number of reasons why real estate is a smart investment.
- Take Advantage of Physical Assets. Real estate investment is a tangible asset and therefore has meaningful value. The property’s land has value and so does the structure itself. Additionally, the income it produces has value to future investors.
- Value Appreciation for Assets. Prices are increasing fast nowadays which is drastically reducing purchasing power. But even so, real estate investment has a long history of providing excellent appreciation in value that surpasses other investment types. Not all properties perform at the same rate however.
- Utilise Leverage to Multiply Asset Value. With real estate investments, you can place debt on the asset which is several times the value of the original equity. This enables you to purchase more assets with less cash, thereby multiplying the asset value and boosting equity as the loans are paid down.
- Cash Flow. One great advantage of engaging in real estate investments is that leases generally secure the assets. This leads to a regular income stream that is often higher than the usual stock dividend yields.
- The Pride of Ownership. Many people don't have the privilege of owning a property. Property ownership creates a sense of pride – that is simply not felt among other asset classes.
Real estate investments can give you many opportunities. Remember, this is a complex and long term investment and always be aware that you need to be financially equipped and ready.
Surrounding yourself with an independent team of professionals will help provide the guidance and advice you need to buy the right property, with the right attributes to grow in value, at the right price.
At Property Mavens, our team of experienced professionals will provide unbiased advice and support for every step of your real estate investment purchase. Contact our team today.