There are a multitude of reasons why people might invest in real estate. Perhaps the main reason is that real estate provides stability and security, especially when compared to more volatile investment options, such as stocks. Real estate is also a tangible asset that can be used as collateral for loans, which can be helpful in times of need. Additionally, many people believe that real estate is a solid way to grow wealth over time.
Real estate has historically outperformed other investment options and has been less risky. For these reasons, many people see real estate as a sound investment choice that can provide long-term benefits. At Tunnera Real Estate, we believe in the importance of investing in real estate and are committed to helping our clients find the right property for their needs.
What Is Real Estate Investing?
There are numerous real estate options. You may purchase an independent home, rent it out to others and earn money from it as you please until the property’s value is higher than what you invest. Or maybe you prefer buying a small strip mall, filling the stores in it and collecting rents from as many revenue-generating residents as your apartment features.
You can invest in an apartment building with a number of residential units, collecting an ongoing paycheck from each tenant. The key is to do your research prior to deciding on the type of property investment that’s best for you.
REITs
Buying into REITs (known as real estate investment trusts) is one of the simplest ways to finance real estate. Why is it important? REITs grant investors the opportunity to invest in real estate without having to keep track of the physical structure.
REITs are organizations that own real estate, from retail properties to residential properties to commercial centers and office towers. When you buy into a REIT, you acquire shares of these properties. It’s a bit like earrings are similar to a mutual fund, except that rather than equities, REITs relate to real estate.
You can make a profit from a REIT in two ways. Initially, REITs pay regular dividend payments to investors. Second, when the worth of a REIT increases, you may sell your investment for a profit.
You can invest in a real estate trust fund just as you would a stock. REITs are listed on the major stock exchanges. The National Association of Real Estate Investment Trusts reports that about 145 million Americans are invested in REITs.
Residential Properties
Buying real estate investment properties can also prove lucrative, though it requires some work on your part. First you locate a residential property, a single-family home or multifamily building, and buy it, generally financing the purchase with a mortgage.
You can then either live in the house or rent it out while the house appreciates in value. If you rent the house out, you might be able to use these monthly checks to pay all of the monthly mortgage payment of your new house. Once the house appreciates in value, you can sell it for a significant profit.
The biggest challenge is, of course, that the property you buy is not guaranteed to rise in worth. You can decrease the odds of a bad investment by evaluating local neighborhoods to find those in which property values tend to increase. You must also work with real estate agents and other individuals that can provide information about appreciation rates for your area.
You’ll have to be mindful of traffic. A home on a busy street may be more affordable, but it might not appreciate as fast as one located on a quiet side street. An apartment building located next to public transportation may enjoy a quicker rate of improvement than one located miles away from the nearest commuter train station.
If you don’t wish to take after-hours phone calls from tenants complaining of heaters that are not working or roofs that leak, you’ll have to pay a property management service. These services specialize in handling day-to-day work for properties and will send repair technicians to address any urgent issues.
Commercial Properties
It’s possible for you to earn a considerable profit buying and investing in commercial properties just the same way you do in residential real estate. First, you buy your real estate. Then, you collect monthly rents from tenants if the property value increases. If the property’s value grows, you can make a profit selling it for a substantial profit.
There are many structures you can invest in for commercial buildings. You can purchase a commercial office and purchase a place to lease out to companies. Also purchasing a strip mall and retail properties to rent out to business owners. You can also purchase a cargo center and lease it to manufacturing businesses or retail stores that need to store your products,
Just as with real estate investments in residential real estate, dependably investing in non-residential property carries a high likelihood of loss. Due to that, it’s important to thoroughly investigate the properties you’re looking at, and not just assume they’ll increase in value. If you’re unable to find good tenants in your earnings property, it might begin steadily to depreciate.
House Flipping
Investors who want to get rich fast often turn to real estate investment. This is when you buy a property at a lower price and then sell it for a quick turnaround. The key is to purchase a suitable house. You don’t plan to pay for rent when flipping a property. Rather, you want to buy a dwelling for the lowest possible price if you want to make a strong profit.
Research is again crucial. You want to find a suitable home in an appealing neighborhood, one which attracts a lot of people. And you need to make sure the repairs necessary for that home aren’t so expensive that they will definitely cause you a loss.
If you’re capable of performing necessary repair work on your own, you will increase the prospects for making a lucrative profit through property flipping.
10 Reasons To Invest In Real Estate
You could be tempted to invest in real estate because it makes you a great deal of money, but it comes with its own risks. Investing in real estate may not even be appropriate for you. Before you invest, think about your own goals and chances for success, and do your research on the possible advantages such as appreciation and cash flow.
1. Steady Cash Flow
Owning real estate is a way to earn supplemental income. Whether you rent commercial real estate or residential real estate, you can lease your space out to tenants. You then receive monthly payments in the form of rent checks. Just be sure to research the rental histories of your tenants in order to reduce the risk of tenants refusing to pay rent.
2. Great Returns
You can sell your pre-owned real estate for a profit if you enable the home to appreciate in value. Keep in mind, however, that appreciation is not guaranteed; you need to only invest in the right asset.
3. Long-Term Security
Real estate is an investment that offers you large returns on a long-term basis, meaning you hold it for a long time while you wait for it to appreciate. You could also earn recurring income via rental of your real estate.
4. Tax Advantages
Real estate ownership can offer tax incentives. You can subtract several costs associated with owning an investment property, including your property taxes, mortgage interest, property management expenses, property insurance, the cost of upkeep, the costs of repairs and maintenance, and the money you spend to market the home to potential tenants. If you decide to sell your home for more than you paid for it, you can also deduct the profit.
5. Diversification
Adding real estate to your portfolio expands the diversity of your investment holdings, which can protect you from loss during turbulent times. Say some stocks are suffering because of an economic downturn. The investment properties in your growing portfolio may actually be experiencing gains, protecting you from losses that other holdings are taking.
6. Passive Income
Investment properties tend to yield passive income that isn’t necessary to be worked for. Suppose you rent out one or more single-family or multifamily properties. The rental checks that arrive in the mail each month are examples of passive income.
7. Ability To Leverage Funds
If you want to invest in real estate, you may not be able to afford to buy properties in full. After all, that single-family residence you plan to rent could cost as much as $200,000. This is where leverage in real estate comes in. You can use other people’s money to get your hands on real estate. In this case, you take out loans from banks, mortgage lenders or credit unions and pay them back with property you own.
8. Protection Against Inflation
Real estate investments are made to secure against inflation. As the prices of goods and services are rising, home values and increased rent are inclined to increase as well. Investment properties can provide you with rising monthly income and appreciation in order to ensure your financial safety when the costs of everything else and general inflation are also increasing.
9. Chance To Build Capital
Increasing your capital is the stated goal of real estate investment. When you sell a home that has risen in worth, you’ll increase your capital. The key to investing wisely is to invest in homes that will increase in value.
10. Fulfillment And Control
Owning real estate gives you personal and professional advantages that are not financial. Owning an investment property means you’re your own boss, which is satisfying to many investors. You can also make your community better, providing homes for tenants or bringing businesses to commercial areas that will provide vital services.
How Real Estate Compares To Other Investments
Most investments have both positive and negative aspects. Here, here’s a look at how real estate stacks up against other investments.
Real Estate Vs. Stocks
Real estate is less volatile than stocks due to its high liquidity. However, real estate is less liquid than stocks. In selling your stocks and cashing out your money, it’s much easier to sell your stocks than your investment in real estate.
Real Estate Vs. Bonds
Bonds are one of the safer types of investments. You will not usually lose money by investing in them. The benefits are smaller, though. You are likely to make higher gains by investing in real estate, though your risk of losing money is also higher.
Real Estate Vs. CDs
Investing in CDs is similar to investing in bonds. These are among the safest of investments, and it is uncommon to lose money when investing in them. But like bonds, your gains are usually lower than you might make when you invest in real estate.
Real Estate Vs. Mutual Funds
Mutual funds have a long-term rate of return. Typically, if you hold onto your mutual fund investments long enough, they will increase in value. Like stocks, it is more advantageous to invest in mutual funds than in real estate. Real estate investments, however, can provide a hedge against economic downfalls that can threaten mutual fund investments.
The Challenges Of Investing In Real Estate
Investing in real estate can represent a lucrative opportunity, but also comes with risks and challenges.
Liquidity
Real estate, like stocks and bonds, isn’t a liquid investment. Naturally, when you invest your money in real estate properties, you will have to sell some of those properties or the capital that you possess to reclaim your money. Other investments, like stocks, are far more liquid. It is easy to sell stocks to have access to your money.
Starting Capital
You’ll need more money to begin investing in real estate. Homes and land aren’t cheap. You’ll have to apply for mortgage loans to purchase these properties. Investing in mutual funds, CDs and stocks normally requires much less capital to start.
Time
You’ll typically wait before making money on real estate investments. Yes, you can charge rent to residential or commercial tenants. However, rental payments usually won’t surpass your monthly mortgage obligations or the cost of maintaining the real estate. The lump-sum profit will come from selling the property for more than what you paid initially for. That target will be achieved once you sell the property for its greatest possible selling price.
Location
Location is vital when investing in real estate. Your property is unlikely to increase in value if it is not located in an area where real estate values are on the rise. Therefore, you will likely have to conduct a considerable amount of research to choose the right property in the right location.
Take Advantage Of Real Estate Investing
Now that you know the advantages of investing in real estate, are you prepared to buy your first investment property? Investing in commercial properties, multifamily buildings, or single-family homes will result in substantial returns if you follow the necessary steps. When you’re still on the fence about whether you should make an investment in property, how to buy a house, or are ready to apply and buy, don’t hesitate to seek more information.
