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Real Estate Investing Basics for Novices Part I
When you are investing in real estate, your goal is to put out money to work and let it increase so you’ll have more money in the future. The return that you get on your investments should be able to cover the risk, the taxes, and of course, all the costs of owning your real estate investments like insurance, maintenance, and utilities.
Investing in real estate should be as simple as a monopoly game once you get an understanding of the basic factors of the investment and the risk.
For you to succeed in in your endeavour, you purchase a property, generate rent and do everything to avoid bankruptcy, and then eventually buy more properties. See, it’s pretty simple! Simple, however, does not necessarily mean easy. Sometimes even the littlest mistakes equate to consequences that could be anything from small inconveniences to really big disasters. There are even unfortunate instances when an investor finds himself broke.
Don’t let that scare you, though! There are actually several ways you can make money when you invest in real estate:
1.Cash Flow Income
This type of investment mainly focuses on purchasing a real estate property and renting it out to collect a regular stream of rent cash from your tenants. You can generate cash flow income from properties like apartment buildings, rental homes, office buildings, storage units, and more.
2. Real Estate Appreciation
This happens when the property’s value increases because of various factors like a change in the real estate market, or the area where your property is located has become busier because of new commercial centers growing there. It could also be because of the upgrades you have had for your investment. You should know, however, that appreciation is a bit tricky and a bit riskier than investing for rental income.
3.Ancillary Real Estate Investment Income
This can also be a huge profit source. Ancillary real estate investment income can come from laundry facilities in rental apartments, vending machines, and more. Basically, they are businesses with a bigger investment – allowing you to earn money from a specific collection of customers.
4.Other Real Estate-Related Income
This is the type of income that is often generated by those who are considered “experts” in the industry like real estate brokers. They make money through commissions that come from buying and selling properties or from real estate management businesses who keep a percentage of rents as payment for running the operations of a property on a daily basis.
These are some of the ways you can make money from your real estate investments. In the second part of this post, we’re going to give you some great tips for buying your first real estate investment, so make sure you check that out, too!
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