Home: For many people, their home is their biggest investment. The advantages to owning your home are a feeling of security, stable housing costs, appreciation and tax benefits. The disadvantages are increased responsibility, and commitment to a community.
Steps to buying a home: 1. figure out how much you can afford, 2. know your rights, 3. shop for a loan, 4. learn about home-buying programs, 5. shop for a home, 6. make an offer, 7. get a home inspection, 8. shop for homeowners insurance, 9. sign the papers.
Rental Property: The historical returns on rental property have been equal to stock market returns with less risk because of the combination of rental income and the property going up in value. In addition, rents usually rise with inflation. The downside is that investing in real estate is a lot more complicated than investing in stocks and bonds and there is the possibility of a bad tenant or no tenant at all.
House Flipping: The process of buying a house, making improvements and selling at a profit. Here are five things to consider. 1. Real estate investments are an expensive proposition. Add to the purchase price, the acquisition costs, interest paid, renovation costs and selling costs. If you do end up making money, you will have to pay capital gains taxes. 2. Renovating and flipping houses is time-consuming. 3. The cost of renovations can be prohibitive if you have to hire skilled professionals. The real money in house flipping comes from sweat equity. If you have the knowledge, skills, experience and time to do the upgrades, your odds of making a profit are increased. 4. You need to know what you are doing. You need to pick the right property, in the right location, at the right price. You need to know which renovations to make and which to skip. You need to understand the applicable tax laws. 5. You need to have enough patience to wait for the right deals. Do your research.
Real Estate Investment Groups are like small mutal funds for rental properties. A company that has apartment buildings will allow investors to buy them through the company. Pay attention to the fees involved.
Real Estate Investment Trusts (REIT) are publicly-traded real estate ventures. There are three common types of REITs: Equity REITs that invest in and own property to provide regular income from apartments, malls and office buildings, etc., 2. Mortgage REITs that invest in and own property mortgages. 3. A hybrid of Equity and Mortgage. You can purchase shares through the stock market or a mutual fund company. Some REIT are not listed on an exchange but are sold to the public and still others are private. Those not listed on the open market may have high fees so do your research. Read those extraordinarily long prospectus with extremely small print.
There are more types of real estate investments that have not been covered here such as Real Estate Hedge Funds. There is much potential for gain by investing in real estate but it is not assured. Make sure to do your own research and make careful choices.
"Remember your dreams and fight for them. You must know what you want from life." - Paul Coelho
"Failing to plan is planning to fail." - Alan Lakein Lakein
"Never underestimate the power of dreams and the influence of the human spirit." - Wilma Rudolph
"Before beginning, plan carefully." - Marcus Cicero