To many, real estate is a no go area for investment. Due to the business ecosystem of our country, so many see real estate as an easy way of getting into trouble. Some other set of people see it as a very expensive investment that requires huge capital to start off. Although, these fears and beliefs are real, they are however far from the truth. They are just unfounded fears. As you will however agree that it takes a courageous individual to invest in any business, so it is not surprising to know that it is only the confident risk takers that involve in real estate. Definitely, the most dreaded activities in life are the ones that pay most.
Why would you want to invest in real estate?
Real estate always appreciate unlike some other investments or properties that depreciate with time. Since money loses value over time, putting your money into real estate is a way to appreciate the value of your money. Investing in real estate can also be less stressful unlike the commodity market. Continuous population growth is another reason to invest in real estate. As the population grows and development increases, the value of your property keeps going up. Real estate investment is one of the few investment opportunities with flexible tax policies. Your investment has the potentials to take care of itself.
Real estate is a very lucrative investment all over the world which may be conducted with no cash at all on the minimum and on the maximum may demand several billions of dollars. What makes the difference is what part of the value chain of Real estate development you want to engage in. Real estate investing refers to the purchase, ownership, lease, or sale of land and any structures on it for the purpose of earning money. Therefore, how much you invest in real estate will be determined by what type of real estate investment you are interested in. In real estate, how much you put in does not always translate to how much you get. It is such an industry that respond to so many other factors outside the size of invested money. Such factors will include location, the type of investment and the investor’s skills, experience etc. You may invest the same amount with another person but have huge difference in returns up to 300 % margin.
It is therefore important to know the basics before leaping into real estate. Real estate is generally divided into three main categories namely residential real estate, commercial real estate and industrial real estate.
- Residential real estate: consists of single family homes, multi-family homes, townhouses, and condominiums that people use as living space and not a working space.
- Commercial real estate: this refers to a property that is used for the purpose of business. Commercial real estate is classified as office (business offices), retail (restaurants), land (farmland), and multi-family (large apartment buildings).
- Industrial real estate: refers to properties that serve industrial business purposes. Examples include factories, warehouses, and power plants.
Similarly, money can be earned on your properties in three ways namely: interest from loans that you provide to a real estate developer, appreciation of owned property and rent on property that you lease out.