Real estate investment is the most lucrative option for people who want to use the extra bucks lying in their savings accounts and want to get bigger returns with the invested money. Real estate investment is not as simple as it seems. If studied deeply, this form of investment has developed over the span of 50 years and has become more complicated than investing in bonds and shares. There are many types of real estate investments.
- Investing in rental property:
This is the basic and simplest form of investment. An investor buys a property and gives it up for rentals. The owner is responsible for the mortgage payments and all the other additional costs that may incur. Ideally the rent is sufficient enough to bear all the costs plus some extra cash is left for the owner as a profit. The cycle continues until the mortgage term gets matured and the property finally becomes the owner’s. He may the sell the property on profit or keep it on rental and enjoy the monthly rent income.
- Real estate investment groups:
Real estate investment groups are like mutual funds. This is ideal for people who wish to invest in real estate but cannot afford to handle the hassles that come with it. The real estate investment groups build complexes. An investor can purchase a unit or number of units. The real estate investment group handles all the messy tasks if maintenance, dealing with legal issues and tacking the tenants. All an investor has to do is pay a decided fee to the group for it.
- Real estate trading:
This is the risky side of real estate investments. The investor buys a property only with a motif of selling it after a short time on profit. This is also called flipping. The investor doesn’t spend at all on improving the state of the property. He invests in a profitable venture and hold it for three to four months until the property can be sold out on better rates.
There are real estate traders who invest in property in a different manner. They target property with an average value and then renovate it. They sell the renovated property at greater profits.
This gets very risky if unfortunately an investor gets stuck with a bad property and cannot offload it. He might incur great losses as these investors usually don’t have enough money at hand to pay for mortgage and other expenses.