Real Estate Investing - An Alternative To Traditional Stock Market Investment

From a historical perspective, investing in real estate is almost as old as the construction of property itself. Indeed many business owners who created their wealth through companies then went on to diversify into real estate investments. In fact, over the years real estate investments have produced similar returns to those found in the stock market. Let’s take a look at some of the reasons:

First of all, and most obviously, the supply of building land around the world is limited, even when taking into account landfill opportunities. Since the world’s population is growing and the demand for housing ever increasing, then there would seem to be a never-ending and increasing requirement for real estate of all types.

Now let’s take a look at the mechanics of buying property. Here it can be seen that investing in real estate is quite different from most other traditional investments such as stocks. With real estate you can often borrow up to around 80 percent of the value of a property, sometimes even the full value and beyond under special circumstances. Thus a more modest investment of say 20 percent of the value can be used to buy and control the full value of the larger investment. Naturally, if the value of your investment increases, I.e. property prices rise, then the value of your real estate investment also increases. If so, then you are into profit, including that on the money you originally borrowed.

Naturally, there will be costs associated with real estate investing (such as legal fees and property maintenance, taxes, etc), but these are usually small in comparison with the potential gains.

Borrowing in order to invest in real estate makes real estate a type of leveraged investment. But if you know anything about leverage, you will realize that leveraged investments can also go against you. What, for example, if the property you purchased for $300,000 decreased in value to $240,000? Even though the value only dropped by 20 percent, you actually lose 100 percent of the original $60,000 investment. And if you have a mortgage on this property making up its full purchase price, you will actually need to pay money to the mortgage provider in order to cover the costs of selling the property. That’s in addition to the loss of the whole of your initial investment.

So, as you see, investing in real estate is something to be taken very seriously and should not be done with money which you might need for other things in the near future. Investment in property is more secure as a long-term investment. In the above example, if you could have held onto the property and not sold it, the loss would purely have been ‘on paper’. In all likelihood, over time the value of the property, unless grossly overpriced when you originally bought it, will rise and you will likely not only recover the full value of the initial investment, but also possibly make a nice profit when you do come to sell.

Another reason that real estate is a popular investment is that there are profits to be made from it whilst you are the owner. In addition to the tax-saving benefits (in that any tax due on the property’s increase in value doesn’t become due until it is eventually sold), you can also make additional money from renting out the property. This can often cover all your running costs of the property, plus providing a profit on top.

Unless you make a large down payment, early on during your ownership the monthly operating profit from your property business is likely to be small or non-existent. But over time this profit will increase as the amount of rent you can charge increases at a higher rate than the running costs. Naturally these profits will be subject to normal income tax rules.

A further benefit of investing in property is that you might be able to purchase cheaply a run-down or ‘distressed’ property and fix it up or develop it further. Properties like this can still be found if you look around carefully. Naturally, investing in this type of real estate can still produce large gains. This is something you certainly can’t do with traditional stock market investments.

However, returning to the initial question about whether real estate investing is still a viable option when current prices seem to be nearing their peak: yes, it can still be so, but you might need to be more creative and prepare to be in for the long haul. Property ‘flipping’ methods that worked extremely successfully yesterday, might not work at all well tomorrow.

You might also consider diversifying into overseas real estate markets. Whilst this will require greater study and analysis, and there are many more legal issues to consider, seeking out what appear to be undervalued international real estate opportunities has the potential to be highly profitable if handled correctly.

Naturally, you should always seek the advice of professionals, both financial and legal, before investing in properties of any description, particularly when considering investing overseas. There might be major implications to your overall taxation. Risks can also be substantially higher when you are not there to oversee your investment in person.

About the Author

You can learn more about real estate investing and Bianca Tavares’ guide to Florida property at Florida Real Estate.

The First Steps In Real Estate Investing

With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.

One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?

Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!

When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.

So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!

Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.

About the Author

Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips

The First Steps In Real Estate Investing

With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.

One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?

Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!

When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.

So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!

Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.

About the Author

Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips

The First Steps In Real Estate Investing

With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.

One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?

Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!

When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.

So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!

Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.

About the Author

Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips

The First Steps In Real Estate Investing

With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.

One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?

Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!

When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.

So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!

Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.

About the Author

Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips

Real Estate Investing - An Alternative To Traditional Stock Market Investment

From a historical perspective, investing in real estate is almost as old as the construction of property itself. Indeed many business owners who created their wealth through companies then went on to diversify into real estate investments. In fact, over the years real estate investments have produced similar returns to those found in the stock market. Let’s take a look at some of the reasons:

First of all, and most obviously, the supply of building land around the world is limited, even when taking into account landfill opportunities. Since the world’s population is growing and the demand for housing ever increasing, then there would seem to be a never-ending and increasing requirement for real estate of all types.

Now let’s take a look at the mechanics of buying property. Here it can be seen that investing in real estate is quite different from most other traditional investments such as stocks. With real estate you can often borrow up to around 80 percent of the value of a property, sometimes even the full value and beyond under special circumstances. Thus a more modest investment of say 20 percent of the value can be used to buy and control the full value of the larger investment. Naturally, if the value of your investment increases, I.e. property prices rise, then the value of your real estate investment also increases. If so, then you are into profit, including that on the money you originally borrowed.

Naturally, there will be costs associated with real estate investing (such as legal fees and property maintenance, taxes, etc), but these are usually small in comparison with the potential gains.

Borrowing in order to invest in real estate makes real estate a type of leveraged investment. But if you know anything about leverage, you will realize that leveraged investments can also go against you. What, for example, if the property you purchased for $300,000 decreased in value to $240,000? Even though the value only dropped by 20 percent, you actually lose 100 percent of the original $60,000 investment. And if you have a mortgage on this property making up its full purchase price, you will actually need to pay money to the mortgage provider in order to cover the costs of selling the property. That’s in addition to the loss of the whole of your initial investment.

So, as you see, investing in real estate is something to be taken very seriously and should not be done with money which you might need for other things in the near future. Investment in property is more secure as a long-term investment. In the above example, if you could have held onto the property and not sold it, the loss would purely have been ‘on paper’. In all likelihood, over time the value of the property, unless grossly overpriced when you originally bought it, will rise and you will likely not only recover the full value of the initial investment, but also possibly make a nice profit when you do come to sell.

Another reason that real estate is a popular investment is that there are profits to be made from it whilst you are the owner. In addition to the tax-saving benefits (in that any tax due on the property’s increase in value doesn’t become due until it is eventually sold), you can also make additional money from renting out the property. This can often cover all your running costs of the property, plus providing a profit on top.

Unless you make a large down payment, early on during your ownership the monthly operating profit from your property business is likely to be small or non-existent. But over time this profit will increase as the amount of rent you can charge increases at a higher rate than the running costs. Naturally these profits will be subject to normal income tax rules.

A further benefit of investing in property is that you might be able to purchase cheaply a run-down or ‘distressed’ property and fix it up or develop it further. Properties like this can still be found if you look around carefully. Naturally, investing in this type of real estate can still produce large gains. This is something you certainly can’t do with traditional stock market investments.

However, returning to the initial question about whether real estate investing is still a viable option when current prices seem to be nearing their peak: yes, it can still be so, but you might need to be more creative and prepare to be in for the long haul. Property ‘flipping’ methods that worked extremely successfully yesterday, might not work at all well tomorrow.

You might also consider diversifying into overseas real estate markets. Whilst this will require greater study and analysis, and there are many more legal issues to consider, seeking out what appear to be undervalued international real estate opportunities has the potential to be highly profitable if handled correctly.

Naturally, you should always seek the advice of professionals, both financial and legal, before investing in properties of any description, particularly when considering investing overseas. There might be major implications to your overall taxation. Risks can also be substantially higher when you are not there to oversee your investment in person.

About the Author

You can learn more about real estate investing and Bianca Tavares’ guide to Florida property at Florida Real Estate.

The First Steps In Real Estate Investing

With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.

One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?

Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!

When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.

So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!

Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.

About the Author

Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips

Real Estate Investing - An Alternative To Traditional Stock Market Investment

From a historical perspective, investing in real estate is almost as old as the construction of property itself. Indeed many business owners who created their wealth through companies then went on to diversify into real estate investments. In fact, over the years real estate investments have produced similar returns to those found in the stock market. Let’s take a look at some of the reasons:

First of all, and most obviously, the supply of building land around the world is limited, even when taking into account landfill opportunities. Since the world’s population is growing and the demand for housing ever increasing, then there would seem to be a never-ending and increasing requirement for real estate of all types.

Now let’s take a look at the mechanics of buying property. Here it can be seen that investing in real estate is quite different from most other traditional investments such as stocks. With real estate you can often borrow up to around 80 percent of the value of a property, sometimes even the full value and beyond under special circumstances. Thus a more modest investment of say 20 percent of the value can be used to buy and control the full value of the larger investment. Naturally, if the value of your investment increases, I.e. property prices rise, then the value of your real estate investment also increases. If so, then you are into profit, including that on the money you originally borrowed.

Naturally, there will be costs associated with real estate investing (such as legal fees and property maintenance, taxes, etc), but these are usually small in comparison with the potential gains.

Borrowing in order to invest in real estate makes real estate a type of leveraged investment. But if you know anything about leverage, you will realize that leveraged investments can also go against you. What, for example, if the property you purchased for $300,000 decreased in value to $240,000? Even though the value only dropped by 20 percent, you actually lose 100 percent of the original $60,000 investment. And if you have a mortgage on this property making up its full purchase price, you will actually need to pay money to the mortgage provider in order to cover the costs of selling the property. That’s in addition to the loss of the whole of your initial investment.

So, as you see, investing in real estate is something to be taken very seriously and should not be done with money which you might need for other things in the near future. Investment in property is more secure as a long-term investment. In the above example, if you could have held onto the property and not sold it, the loss would purely have been ‘on paper’. In all likelihood, over time the value of the property, unless grossly overpriced when you originally bought it, will rise and you will likely not only recover the full value of the initial investment, but also possibly make a nice profit when you do come to sell.

Another reason that real estate is a popular investment is that there are profits to be made from it whilst you are the owner. In addition to the tax-saving benefits (in that any tax due on the property’s increase in value doesn’t become due until it is eventually sold), you can also make additional money from renting out the property. This can often cover all your running costs of the property, plus providing a profit on top.

Unless you make a large down payment, early on during your ownership the monthly operating profit from your property business is likely to be small or non-existent. But over time this profit will increase as the amount of rent you can charge increases at a higher rate than the running costs. Naturally these profits will be subject to normal income tax rules.

A further benefit of investing in property is that you might be able to purchase cheaply a run-down or ‘distressed’ property and fix it up or develop it further. Properties like this can still be found if you look around carefully. Naturally, investing in this type of real estate can still produce large gains. This is something you certainly can’t do with traditional stock market investments.

However, returning to the initial question about whether real estate investing is still a viable option when current prices seem to be nearing their peak: yes, it can still be so, but you might need to be more creative and prepare to be in for the long haul. Property ‘flipping’ methods that worked extremely successfully yesterday, might not work at all well tomorrow.

You might also consider diversifying into overseas real estate markets. Whilst this will require greater study and analysis, and there are many more legal issues to consider, seeking out what appear to be undervalued international real estate opportunities has the potential to be highly profitable if handled correctly.

Naturally, you should always seek the advice of professionals, both financial and legal, before investing in properties of any description, particularly when considering investing overseas. There might be major implications to your overall taxation. Risks can also be substantially higher when you are not there to oversee your investment in person.

About the Author

You can learn more about real estate investing and Bianca Tavares’ guide to Florida property at Florida Real Estate.

The First Steps In Real Estate Investing

With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.

One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?

Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!

When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.

So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!

Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.

About the Author

Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips