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Basics of Investing in Real Estate

Updated on September 16, 2015

Primarily, Real estate for instance can be defined as immovable property usually buildings or housing and the ground they are built on.

Land without an owner is not considered real estate.

Real Estate investing involves the buying, owning and managing the sale of real estate for gains.

An investor majoring in Real Estate ought to be financially stable since Real Estate is a very high capital demanding investment and highly cash flow dependent.

The investor may gain capital through mortgage finance whereby he/she believes in making more profits from the asset than the capital input.

If the aspiring investor does not put in place some factors e.g. capital then it will be too risky to get involved in the intended investment.

INVESTMENT PROPERTIES - SOURCES

Real Estate investors majorly use a wide range of land evaluation techniques to determine the basic value of properties before purchase.

It is important to define the selection criteria when evaluating the property to invest in because it helps you stay focused and keep you on track to buy an investment property worthy on the longer run.

Typically sources of investment properties include;

  • Government Entities such as the Freddie Mac
  • Foreclosure sales or Estate sales
  • Real estate wholesalers and investors
  • Bank real estate owned departments for REO’s and short sales

After the investor locates the investment property he will negotiate a sale price and the terms of sale with the seller then figures out contract for sale.

The process of acquiring may be costly and quite costly thus most of the investors recruit estate agents to assist in the whole procedure.

QUALITIES OF REAL ESTATE INVESTORS

1. HAVING GOOD KNOWLEDGE ABOUT THE MARKET

  • In order to successfully invest in real estate the investor should have the know-how on how the market functions and operates. He is ought to evaluate his goals and finances to determine which option best suits him.
  • There are two main markets when dealing with real estate. They include public and private markets. Public real estate involves the buying of shares of a publicly traded real estate company. He buys shares on the market and are paid dividends as the as the trust collects rent and value from the many properties it owns. Private real estate involves the buying of an ownership interest in real property. This is a direct way of investing because you are the owner responsible for everything.
  • He should choose the real estate sector he is interested in investing. There are four sectors which include public equity, private equity, private debt and public debt.
  • He should lastly learn real estate trading where the goal is to buy property and invest in it and resell it at higher price. The investors may try to resell their properties as quick as possible to minimize the cost of owning.

2. ABILITY TO ANALYZE YOUR FINANCES

  • For instance you need to evaluate your assets. Real estate investment requires a high amount of capital even beyond the price of buying. Real Estate being a tangible property it requires maintenance.
  • You ought to know that flipping a house is highly expensive hence need to prepare well. You have to research the ins and outs of house flipping prior to involvement.

3. ABLE TO ASSEMBLE A TEAM

  • You should make a strategic plan and analyze it through an investment broker to evaluate and also involve a financial planner.
  • You need to work along other professionals to ensure the whole process run well. You may need a home inspector, a mortgage broker along others.
  • Getting to talk to mortgage brokers and find out what the brokers and banks can offer in terms of interest rates.

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