Everyone, of course, needs to have an edifice of some sort to live in, whether it is a house, a room within a house or a trailer. But not everyone who purchases a new house does so for a place to live. There are those who own many properties while actually residing in only one or, at most, two of them, while renters may occupy the others; or they may hope to sell some of them at a higher price than they originally purchased them for. For such people, real estate is essentially a form of investment, a way of saving up for retirement, more than anything else. Indeed, Millionaire Corner has stated that “investing in income-producing real estate is a staple for many wealthy families.” This article will tell you how you can undertake such a venture.
Factors that affect the real estate market trend
As with any major form of investment, the value of real estate is affected by the overall state of the economy. Supply and demand are the foremost factors that determine value - and often, due to the so-called multiplier effect, even a minor tilt of the scales can cause the demand side to experience strong “shocks” which can in turn provoke a drastic reaction on the supply side.
How to invest effectively in real estate
Anyone who wishes to invest in real estate needs to have the a good credit record as well as a solid education. He or she must also be prepared to be in the business for the “long haul.” Mortgage values should be the prime factor in each purchasing decision - searching for a mortgage deal is essentially similar to searching for a loan on one's house, so you do not want to take out more than you can pay back. It is important most of all to know the current mortgage rates in your area. Roughly speaking, for every half percent decrease in the interest rates, you can save $30 per month. If the ratio between the cost of the loan and the number of months you expect to own the property is less than the product of your monthly savings by that number of months, then it might be a good idea to refinance your home.
The first thing you want to do is to make sure that your finances are in order, saving for a down payment on the first property. This means that you go over your credit history and correct any false information that you find there. It also means going over any joint accounts that you have with your spouse, if you are married, to be sure that they too are in good standing.
Being educated in the subject is also a must. Courses on real estate investing are available from both universities and businesses, and many may be taken online. One example of such a training company is the Norris Group, which is based in California; among their classes is one with the curious title of California Investor Distressed Property Boot Camp. And indeed, making investments is like fighting a battle, for which you need an “army” of experts, brokers and others. Likewise, reading books and visiting blogs are good ways to learn what you need to know; and, of course, with a blog you have the advantage of being able to ask questions and get answers.
Real estate investment is like comedy: Both are all about timing. When the market is down, search for any properties that are under-priced, buy some and then wait for the market to go up before making sales.
Renting out property
Leasing property can be another lucrative source of wealth. However, there is always the possibility that you will have to evict a tenant, or he or she will move out prematurely, leaving the property vacant. You should therefore be sure that you will be able to make your mortgage payments if such a thing should happen. As the old saying goes, “Don't count your chickens before they hatch.”
Tax benefits of real estate investing
Property investments can also give you tax breaks. Interest paid on the mortgage on your primary residence can be deducted from your tax returns, as can the same payments on a vacation home that you occupy for less than fourteen days a year.
Real estate investing, if you approach it in the right way, can make you a truly wealthy individual indeed.