How to Invest in Real Estate- A Beginner’s Guide

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There are several ways of investing money for future savings and undoubtedly real estate is one of the best ways available among them. Besides, while investing, diversifying the total amount of money is important. So, one must think of other ways of investment as well apart from stocks and bonds. It is important to know the most important facts about this lucrative option before one starts investing.

  • Consider becoming a landlord:

There are two ways of doing this-

  • By buying a rental property- one needs to buy a property for this and take care of everything- from payment to maintenance. However, this option is a bit costly. The investment return must be assessed properly before investing money on this.
  • By renting a portion of the existing house- this is the old school safe option of getting some money out of the unused property you already own.The advantage here is that, due to living closely with the tenant the chances of damage to the property is low.

The good things about renting is that

  • This is a regular source of income
  • This is a tax deductible source as well
  • After paying the mortgage there are chances of pure profit

While, renting might seem like a good option of investment there are some problems with this option as well.

  • Managing tenants is a headache
  • Damage of the property
  • Real Estate Trading:

If someone has enough capital real estate trading can be a good option for them. This is also known as house flipping. In this process someone buys and then sells a house and gets to keep the profit.

The best thing about this option is that the chances of return are good. However, there are some problems as well. They are-

  • The option is a bit risky
  • Without excellent knowledge of real estate one might lose big
  • One needs to know how to find such prospective houses
  • Taking care of repairing can be a headache for some.
  • Invest in big projects:

If you have only a little money allotted for real estate, this could be the ideal way for you. In this process, anyone can invest any amount (small or big) with a group of investors. In this way, investment is possible even with a very little amount.

  • REIT or Real Estate Investment Trusts:

REIT is ideal option for those who do not want any involvement. This is basically the mixture of real estate and stock market. Equity, mortgages are several types REIT. Due to the long-term nature of these leases, the chances of getting the money back is higher.

  • REIGs:

Real Estate Investment Groups operate the whole process of managing the renting and buying process in exchange of a commission. If someone wants to avoid the headaches associated with renting a property, then this could be the best option. However, this option is not risk free as well.

These are just the basics of real estate investment. One should gain more knowledge about these individual options before putting their money into real estate investment.

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