According to Morgan Stanley Capital International (MSCI), an investment research firm, the global real estate investment market came in at USD$8.9 trillion in 2018. This statistic is based on all professionally-managed properties and doesn’t include personal properties. With this info, somebody could conclude that real estate investments are growing, and more individuals are attracted to having more profit by buying properties to sell.
Furthermore, investing in real estate can sometimes be too daunting to accomplish on your own. That’s why Real Estate Consultants exist so that they can provide you with expert advice on how to buy or develop a property for future financial gain.
If you want to start dabbling into real estate, here is a brief guide on how to invest in real estate properties.
Know the reason for investing
There are many reasons that people might invest in real estate. Most people will invest for personal reasons. Some investors seek a consistent form of cash flow such as rental income, some invest so they can have tax benefits, others want the capacity to buy low-priced property, and others are in on it mostly for building a better life for themselves and family.
Know the types of real estate
Real estate property varies significantly, and you should know about each of these options so that you can choose what’s most suitable for you.
- Commercial Real Estate – This type of real estate is made primarily for business purposes by providing workspaces. It can be divided into four main classes: industrial, retail, multi-family rental, and office space. These types of property are usually leased to tenants to generate income.
- Residential Real Estate – This type of real estate is zoned or developed to be a place for people to live in. Residential properties include condominiums, single-family houses, townhomes, or mobile homes.
- Vacant Lands – These generally don’t have any commercial or residential infrastructures on the property, including farms and ranches. This type of real estate includes rights to water, minerals, and other resources found within the land. In addition, the cost of vacant land varies depending on the location, size, and authorized usage.
Know the types of property investments
Property investment comes in two forms: either you’ll practice active investing or choose passive investing instead. So, what is it about these two types?
- Active Investing – This type of investment is where you directly influence how you use your money to spend on a property. This is also the type of investment where you’re directly involved in the operation or ownership of a property.
- Passive Investing – This is a type of investment in which another person will control the actual investment. It allows more leeway concerning the investor’s time, but it gives the investor little or no say on investment policies. To add, you can invest passively through trusts or mutual funds.
With a brief description of the different types of investment given above, you now have an idea of which options will help you grow your money through real estate. The possibilities all depend on the availability of your time and the capacity to invest on your own by having proper knowledge of the market.
Have extra money in case of emergency
Unexpected and inevitable expenses during the sale of a property can come at any time. One example is when a tenant refuses to pay or can’t pay. This can lead you to pay for the rent for a while. That’s why having a backup fund is vital so that you can be sure that the plan concerning your property investment will continue.
You need to save enough for at least three months of your expenses, preferably enough to cover for six months worth of costs. You must calculate your monthly costs and use some of those as an emergency fund instead. The more you save, the more time you can allot to finding another source of income before you end up going into the red.
There are other ways that you can have an emergency fund. One way is to borrow money to prepare for unexpected costs, although interest rates vary depending on where the money is coming from. You can also sell services or products primarily through the Internet. Last but not least, you can have a partner that will assist you in financing your real estate ventures while you control the property investment.
To sum up…
Real Estate investment is popular with many individuals worldwide, and there is a real opportunity to grow your cash. However, having some knowledge before getting into the trade is essential. Knowing the types of property investment, the importance of having cash reserves, and having the right reason for investing should be mandatory before you decide to invest in a property.