So you’re looking to invest? Maybe you’ve considered stocks and savings, but what about real estate? The below article guides you through the basics of investing in the real estate market, analyzing and evaluating some of the best ways for investors to make the most of their money.
You’ve probably heard all the hype surrounding accumulative wealth in real estate. The markets are certainly there to take advantage of with a lucrative rental market and foreclosures, there’s a lot of opportunities out there for potential investors. However it’s understandable to find taking those first steps on your journey into the world of real estate a little daunting, especially with the prospect of a large initial investment. Of course any investment carries a potential risk and there are safer ways of saving money, however none of those options will result in the same capital gain or give you the same degree of flexibility as investing in real estate.
For those unfamiliar with the term, accumulative wealth refers the combination of various revenue streams, culminating in a lump sum. These are often in the form of dividends or pay-outs, or in this case monthly or yearly capital gains from real estate properties. This method of accumulative wealth building goes back a long way and in modern times its widely believed to be the best way of building wealth as opposed to simple savings.
Real estate 101
Influenced by the many real estate success stories, there is a number of people taking advantage of the property market and learning how to accumulate wealth at ease. On the face of it real estate may seem simple; it’s all a matter of calculating the expected return on an initial investment – buy low sell high! And to an extent it is, however the real work goes into the research and evaluation of all the relative factors that will lead you to achieving and ultimately realizing that all-important return.
Real estate investing 101 – Buying Private
There are two widely accepted ways in which to start investing in real estate and build wealth. The first is buying up property yourself, to do so you’ll need to take into account the demand for specific properties, the local market, your target demographic and a wealth of other considerations.
Real estate investing 101 – REIT (Real Estate Investment Trust)
The second is through Real Estate Investment Trusts or REIT’s, those looking to invest in real estate can buy shares in these trusts, who in turn buy up property and lease out to tenants or re-sell for a profit. REITs certainly take some of the hassle that come with direct real estate investment such as property management and also reduces the risk involved as its spread across the board of shareholders. The return however is also spread across that same board and subsequently may not be to the same level as the more direct route. The other downside is that the majority of REIT’s pay out annually, so before investing one cent of your money its worth doing some research beforehand.
Risk vs. Reward
Whatever route you decide to take it all comes down to Risk vs. Reward, are you willing to put in the extra work and take on the increased level of risk for a better return? Or are you content with the stable, sustainable return an REIT will give you? It’s certainly something to seriously consider. Both amount to what we call accumulative wealth and if nothing else, one thing is certain, the real estate market is thriving, with the current economic climate and the increased demand in the rental market, real estate may be the way to go!