Real estate is generally a great investment option

Residential Real Estate

• More affordable for the small investor
• Is less expensive and more feasible to individuals
• It is an area developed for people to live on and cannot be used for commercial or industrial purposes which structures may be single-family housing, multi-family residential, or mobile homes

Commercial Real Estate

• More valuable and more stable
• May encompass several units of properties that have been assembled to create a larger unit
• Is property used solely for business purposes and often leased to tenants for that purpose
• It refers to buildings or land to generate a profit, either from capital gain or rental income. Includes office buildings, skyscrapers, medical centres, hotels, malls, retail stores, farmland, multifamily housing buildings, warehouses and garages

Industrial Real Estate

• Property that is used for manufacturing, processing, warehousing or retail purposes
• These properties are usually larger in size and locations may include access to transportation hubs such as rail lines and harbours

There are many variables that make real estate investing significantly profitable. On the other hand, the same variables may cost investors far more than what they bargained for. Before investing in real estate, you need to understand why you want to invest in property.

Advantages:

• Offers steady income
• If you purchase the property for much less than its value, you may repair or update it and resell it at a much higher selling price
• Get additional income from rental property
• You have access to credit as lending institutions lend more money to people who own property
• You can leave the property as a legacy for your children after your death
• A big help if you are looking for financing as property can be used as your guarantee for your loan

Disadvantages:

• May require active management expertise
• Investors often do not have the cash to pay outright for a property. Instead, they typically take out loans. If you purchase a property for flipping and it does not sell, you are stuck with debt and with paying on the debt until the property does sell. If you invest in rental property, it would also be a great detriment if the renter stopped paying his rent and you had to go through the courts to remove the renter. That results in more debt for the investor
• Additional expenses for owners of rental property for timely repairs
• Legal issues may come into play when investors become owners of the property. Once you own the property, you become liable for damages to others who come onto the property

Key factors that affect property prices:

• Supply and demand
• Interest rates
• Economic growth
• Demographics
• Location
• Amenity/Facility

Supply and Demand

• If demand for property increases faster than supply, then property prices go up

Interest rates

• When interest rates rise, mortgage lenders generally increase the cost of variable mortgage payments. These higher interest rates, in turn, make home-buying less attractive

Economic growth

• As the economy grows and wages increase more people can afford to buy a house, this, in turn, increases overall demand, which increases prices

Location

• Units/properties that are closer to the beach or closer to transport or in the heart of the city or accessible to all tend to sell at a higher price

Amenity/Facility

• For example, if the house has parking or garage it increases the value of the home. Also, if the space of the property is bigger with more rooms and a bathroom with a balcony this could increase the value of the property



Appreciation is achieved through different means, but the increase in a property’s value isn’t realized until the owner sells it the property. Another way to realize profit would be to refinance the mortgage. Appreciation can also come from discovering valuable materials or natural resources on a plot of land, like striking oil. Also, a rise in the market values of the area around the land you own. Scarcity can also play a role in the value of real estate holdings. If a lot is the last of its size or kind in a prestigious area—or one where such lots rarely become available—it gains in marketability.

Income from real estate comes in many forms. The biggest generator is the rent paid on land already developed into residential or commercial properties. Income can also come from indirect real estate investments. In a REIT, the owner of multiple properties sells shares to investors and passes along rental income in the form of distributions.

If you want to invest in property it is important that you know who you are investing with and due diligence is essential.