Real Estate Investing Made Simple
Real estate investing is far from easy, many people would say.
If you’re investing for short-term appreciation, you’re in for a bumpy ride in the current business climate. I think most people would agree that short-term appreciation isn’t a reasonable goal these days.
If you’re looking for long-term appreciation, you need to purchase a property at a price that allows room to pay management fees. Or you can manage the property. Here’s what’s hard to predict: the tenants.
In commercial real estate, you run the danger of not having any tenants, if the local market is glutted. And that is the case in many local markets. In residential real estate, you might find yourself doing a fair amount of maintenance. You may worry about finding the right tenant. How do you create a lease? How do you screen tenants so as to find the ones who will stay a long time and keep up your property for you?
A real-estate investment trust (REIT) is the real hands-free alternative. You simply buy shares in a publicly traded fund that owns property, often commercial property, and possibly mortgages. When the stock market goes up, these funds tend to go down, and vice versa. This helps balance your holdings.
But the fund fees can siphon off your profits. What if you want a simple, low-risk long-term investment ? One where you can file the deed in your safe deposit box?
What do you think of the idea of investing your money in a single-family home, to be rented out? You can choose the house from a variety of local sunbelt markets, and you can take advantage of negotiated relationships with property managers, insurers, and mortgage originators. All this at just five to 10 percent down on each home.
An arrangement like this provides you with a balance sheet with predictable income and expenses. Your tenant will simply pay off the mortgage. In 15 years, you can sell the house and walk off with the equity.
Once you set foot in the real estate market and enter into various deals, it is important to keep track of how much money you make out of those deals. Although, there might be certain factors that are clear and...
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