Have you ever thought about investing in real estate? Plenty of people do it. Some are wildly successful…others fail miserably. So how do you know if you should invest in real estate? There are a few reasons, and this article should help clear up your curiosity.
A Few Reasons You Should Invest in Real Estate
There are plenty of reasons to commit some of your financial resources to real estate, but the same could be said of nearly any type of investment. If you’re on the fence about fencing off some property of your own, it might be a good idea to look at what this type of commitment can do for you. If it fits your personal and financial goals, then you’re well on your way to a decision. Before you start, make sure to consider:
- The length of time you plan to own the investment
- Your initial capital commitment
- The amount of return you expect, both during and upon maturation of the investment
- How you plan to use your property
1) A Place To Live
By far, one of the most popular ways of investing in real estate is buying a family home. This method has too many benefits to list here, but one of the biggest ones is security. Your home would probably be there for you through thick and thin. As long as you can pay your mortgage, your primary residence would usually remain in your possession — that is, it would probably be safe from debt-relief liquidation. As such, a home could be a good place to store value if you plan on taking some financial risks.
2) Making a First Investment
First-time homebuyers gain some important advantages from their commitments. There are often tax credits available for this type of purchase, as long as the buyer wants to live in the property they buy. Banks might be tougher on loan applicants who don’t have substantial equity, but the credits are sometimes enough to balance that if you’re making a purchase within your range.
3) Lower Levels of Commitment
A building or land purchase often involves financing, typically through a mortgage. There is one problem with this, however. The requirements of a direct purchase — financed or not — might be too high if you don’t intend to use the unit for business or personal purposes.
You could avoid or reduce these initial and ongoing costs by investing indirectly in private equity real estate. There are many ways to do this, such as contributing to a privately managed holding fund or buying stock in a public real estate holding company.
4) Follow Your Dreams
You should never rule out a market based on assumptions. Essentially, you might be able to buy a dream home. However, you will never know until you look around to see what’s on the market. Most people don’t feel comfortable enough to reach out to an agent for information. Don’t let this type of reluctance stop you from finding a property that could increase your wealth — any real estate professional would be happy to be contacted by a potential buyer.
5) Get Close to Home or Far Away
Where to buy a home is often a personal choice, especially if it’s a family home. However, buyers with some flexibility should seek out markets with stable growth, high rent prices or undervalued listings — key indicators that the area in question would be a suitable place to execute long-term investment, business or speculation strategies, respectively.
Buying in or near an up-and-coming city, such as Columbus, Ohio, could provide career and future home sales opportunities. For more entrepreneurially focused real estate buyers, resort-style properties might attract significant rental revenue: Utah’s park city real estate and Grand Cayman’s Georgetown condos are two such examples. Markets such as Detroit that suffered from downturns might benefit from some outside investment.
A Final Thought
One of the challenges when you invest in real estate is that, unlike securities, each unit is unique. Successful buyers and sellers use that to their advantage. They analyze each opportunity, develop a strategy, and, if their methods succeed, they adapt their techniques to apply to other, comparable pieces of property. The key to this process is data — information that is updated, accurate and extensive.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.