Beginners Guide to Real Estate Investment

In today’s economic climate, real estate investment is one of the safest wealth generators to embark on. Real estate provides several benefits and returns and also can be diversified based on the strategic goals of the investor. With adequate research and networking, new investors can capitalize on the gains and leverage that property ownership can provide, with little risk over the long term. A new investor should clearly understand why one should invest in real estate, the types of properties that can be purchased and leveraged, and utilize the tools of knowledge and networking to create a commonsense approach to creating a successful portfolio that is right for their end game.

Types of Real Estate Investment

There are three major types of property investment: commercial properties, residential properties, and land ownership. The profit margin can be divided between two primary purposes. The first is that the investment will have an ongoing cash flow by providing goods and services to businesses or individuals, and the second is that the acquisition will result in a sale after improvements.

Commercial investments carry a high return as the cost per square foot is substantially higher, but the location and success of the business can impact the overall return.

Residential, whether it is a single-family home or a residential complex, can provide a safer form of investment but usually entails substantially more management as individuals tend to have shorter lease agreements and a higher need for repair and upkeep. As an investor capitalizes on monthly cash flow (a successful income averaging 2-5% of the overall mortgage cost) this passive income generates revenue through tax breaks and provides equity leverage for other potential purchases.

Land is a profitable margin if there is a potential for commercial or residential build, and land value does increase over a long period of time. However, investors typically will be paying out property tax, and unless there is a regular cash flow from another investment, this will not result in an immediate gain.

Tools for Success

A new real estate investor must arm themselves with the tools of success, which include research, networking, and diversification. One must always have their ears and eyes open to the right opportunities and weigh the potential risks.

Research is the first and most important key. Understanding local taxes, potential development opportunities, and geographic demography is important- while at the same time understanding the economic strategies that will ensure that the purchase will not be a loss on capital gain. Investors pay attention with their ears and their eyes to open opportunities, as well as the economic conditions surrounding the potential investment area.

Networking with funders and other real estate investors is a great way to begin preliminary research. Connecting with other investors may lead to opportunity for a partnership. There are several different types of investment partnerships, and you should learn more about which choices are the most beneficial. Networking also involves speaking with different financial institutions and negotiating the best rates if an investor does not have all funds immediately accessible.

Diversification means spreading out the investment portfolio over different types of acquisitions. An investor looks to have one with a short-term cash flow availability, and perhaps one that will provide plans over a longer-term investment; thereby providing security over varying lengths of time for the portfolio.

Doing the homework by researching all variables, networking with those who have been successful in the field, and diversifying the portfolio between residential, commercial, and land acquisitions is one of the surest ways to become successful in this endeavor.