How does the real estate industry work?
10 reasons why you shouldn’t invest in property through crowd property
January 20, 2020
Real estate is generally a great investment option
January 24, 2020The real estate industry works because the value of real estate tends to rise. As a result, people are able to make a profit by buying and selling real estate.
When supply is greater than demand, prices fall. When demand is greater than supplies, prices rise.
Everyone who buys or sells a home engages in real estate investing. When you get involved with this industry you need to consider many things like if the value of this property will rise, or the future mortgage and taxes affect you.
Many people do so well with investing in their homes they want to buy and sell homes as a business. There are many ways to do that. First, you can flip a house. That's where you buy a house to improve then sell it. Many people own several homes and rent them out.
You can also invest in housing without buying a home. You can buy stocks of home-builders. Their stock prices rise and fall with the housing market. Another way is with Real Estate Investment Trusts, called REITs. These are investments in commercial real estate. Their stock prices lag behind trends in residential real estate by a few years.
Things you must know before you buy a rental property
Before you buy a rental property consider three things: the expected amount of rental income, the annual expenses you will incur, and the risks that may come along.
When searching for a rental property, find out how much a reasonable rent rate is accounting for the location and quality of the property.
Property expenses divided into two categories:
Fixed Expenses:
This includes recurring expenses such as annual property taxes, insurance, routine maintenance and repair items, and the cost of any property management services.
Variable Expenses
Setting aside funds for unexpected expenses like replacing a water heater, air conditioner or heater, roof, fencing, flooring or plumbing.
Risks of buying rental property
Before you buy a rental property, consider the following risks:
- Your property could sit empty between renters, lowering your overall return.
- You could incur legal expenses should you need to evict a bad tenant.
- You could incur excess repair costs should a bad tenant cause damage to the property.
Process in investing in Real Estate
- Write down your goals and be specific, think if it is attainable
- Pick the type of property you want to invest in
- Raise cash for down payments and reserves
- Check your financial requirements
- Get a partner if you want for you not to put up all your personal money
- Choose the location where you plan to buy the property, make sure you already did your research about the property
- Create a plan to find deals
Before investing, make sure that you understand the steps and you did your research.
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