Real Estate

REAL ESTATE
What is real estate?

 Realestate is property comprised of land and
the buildings on it, as well as the natural
resources of the land, including uncultivated
flora and fauna, farmed crops and livestock,
water and mineral deposits.
 Three
categories of real estate; Residential,
Commercial, Industrial.
Investment Real Estate
 Investment real estate is real estate that
generates income or is otherwise intended
for investment purposes rather than as a
primary residence. It is common for
investors to own multiple pieces of real
estate, one of which serves as a primary
residence, while the others are used to
generate rental income and profits through
price appreciation.
Advantage and
Disadvantages of investing
Real Estate
Advantages:
 Income Stream
If the property is easily convertible to rental units, the owner of the property
can earn a steady income stream in the form of rent. Depending on the
geographical location the property is located in, the earnings can be quite
significant. For example, urban city centers or towns with colleges and
universities tend to offer the highest income streams because the demand for
rental units is always high.
 Security
Owning property can offer the investor a sense of security because the value
does not tend to fluctuate as much as other assets such as stocks and bonds.
However, this does not mean that the investor will always break even or earn a
profit on their investment. Although housing prices do not tend to fluctuate in
the short term, they may increase or decrease in value in the longer term.
Therefore, it is important for the investor to thoroughly research the area
before making a purchase.
Advantages:
 Self Occupation
Another reason why many investors are attracted to investing in real estate is
because the property can be utilized by the investor. They can either live on the
property while they fix it up, or they can be a live-in landlord and earn an income
stream at the same time by renting out the other rooms.
 Tax Shelter
Since tax laws on income properties vary depending on your jurisdiction, you
should always be sure to thoroughly research it beforehand. However, it is very
common for taxes on any gains to be deferred until you sell the property. For
example, if a house appreciates in value from $250,000 to $300,000, the investor
will not be required to pay the taxes on the extra $50,000 until the property is
sold.
Disadvantages:
 Maintenance Cost
 The cost of maintaining the property can cause the investor to lose
money on the investment. In larger cities, property taxes can be so
high that it will be very difficult to resell the house at a higher
value.
 If the owner of the property is renting out the units, maintenance
costs can take large chunks out of the income stream. If the owner
does not personally know the tenants before renting out the units,
they run into the risk of renting the space out to someone who will
not take care of the unit, causing the owner to put large sums of
money into repairs. Furthermore, other costs such as electricity and
heating will also add
Disadvantages:
 Legal Difficulties
Investing in real estate has the potential of being very confusing because it
requires that you are fully aware of the laws in each jurisdiction that you own
property. Some jurisdictions may even enforce land ceilings which can make the
investment risky. The legal difficulties can become much more complex if the
investor is investing in commercial real estate.
 Property Taxes
Before investing in real estate, the investor should always factor property taxes
into their valuation of the property. In larger urban cities, property taxes can be
significant and may cause the investor to lose a big chunk of their profit. Property
taxes will vary depending on which city or state the property is purchased in.
Therefore, the investor should always consult with city officials before investing in
property.
How to invest in Real Estate?
 REITs
A real estate investment trust (REIT) is created when a
corporation (or trust) uses investors' money to purchase and
operate income properties. REITs are bought and sold on the
major exchanges, just like any other stock.
 Real estate trading
Real estate traders buy properties with the intention of holding
them for a short period of time, often no more than three to four
months, whereupon they hope to sell them for a profit. This
technique is also called flipping properties and is based on
buying properties that are either significantly undervalued or are
in a very hot market.
How to invest in Real Estate?
 Basic Rental Properties
This is an investment as old as the practice of land ownership. A person
will buy a property and rent it out to a tenant. The owner, the landlord,
is responsible for paying the mortgage, taxes and costs of maintaining
the property.
 Real estate investments groups
A company will buy or build a set of apartment blocks or condos and then
allow investors to buy them through the company, thus joining the group.
A single investor can own one or multiple units of self-contained living
space, but the company operating the investment group collectively
manages all the units, taking care of maintenance, advertising vacant
units and interviewing tenants. In exchange for this management, the
company takes a percentage of the monthly rent
Why invest in Real Estate?
 Attractive and Stable Income Return
 High Tangible Asset Value

Real Estate

Uploaded by

Copyright:

Available Formats

Real Estate

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Real Estate

Uploaded by

Copyright:

Available Formats

REAL ESTATE

What is real estate?

You might also like