Investing in real estate is one of the oldest way of investing, having been around since the early days of developed human civilization. Predating recent stock markets, real estate is one of the five basic asset classes that every investor should seriously think adding to his or her portfolio for the exclusive cash flow, liquidity, profitability, and net worth characteristics as well as the diversification profits it offers.
In this introductory guide to real estate for new investors, I want to tell you through some of the basics and point you to more in-depth content on definite concepts so you can learn about them if you feel it is an area in which you want to become more familiar. I will also explain some of the other ways you might acquire or take ownership in real estate investments.
What Is Real Estate Investing?
Real estate investing is a wide category of operating, investing, and fiscal activities centered around making money from physical property or cash flows somehow fixed to tangible property. There a myriad of numerous types of real estate investments a person might consider for his or her portfolio.
Real estate investments make Rental Income
In its purest, simplest form, the basic concept behind real estate investing is that the investor, also recognized as the landlord, acquires a piece of tangible property; farmland, land with a house on it, land with a place of work building on it, land with an manufacturing warehouse on it, doesn’t matter for our purposes at this point in the discussion.
Person then finds somebody who wants to use these assets, known as a renter, and they enter into an agreement. The paying guest is granted access to the real estate, to use it under certain terms, for a particular length of time, some of which are laid out in central, state, and local law and others of which are agreed upon in what is known as a rental agreement or lease contract.
In exchange, the leaseholder pays for the use of the real estate. The payment he or she sends to the property-owner is known as “rent”.
For many investors, this has an enormous psychological advantage over investing in stocks and bonds. They can paint it their favorite color or rent an architect and construction company to transform it. They can use their negotiation skills to determine the leasing rate, allowing an excellent operator to generate higher capitalization rates, which we talked about a small piece in making money from Real Estate Investing.
There are so many Real estate consulting firms in the market which helps in buying and selling property. From time to time, real estate investors become as mistaken as stock investors during stock market bubbles, insisting that capitalization rates don’t matter. If you are able to price your leasing rates appropriately, you should enjoy a suitable rate of return on your capital after accounting for the cost of the property, and other related expenses.