Five Approaches to Real Estate Investing
Real Estate Investing is one of the most popular of the many ways to amass great wealth in the world today. Certainly, one of the reasons for this popularity is its ease of entry. Rags to riches stories abound about the successes in the lucrative yet risky field of real estate investing. And it does make for an interesting study, as there are many possible combinations of paths to success. For an investor willing to commit some time to studying the market segments, and the various risks and rewards, real estate can truly turn out to be a route to wealth accumulation. What follows are five approaches to real estate investment.
Rental Income Property. Real property values, for the most part, have more stable growth than other common investment vehicles which may have frequent if not large swings in their underlying values. The problem is that far too few people can actually afford to hold and maintain multiple properties over an extended and indefinite period of time while waiting for the value to rise. Many property investors manage to overcome this by renting the properties to tenants during the time when the property values are rising. This allows the tenants to essentially cover the note on the property and makes the venture a little less risky though there are risks involved when dealing with tenants. Things like failure to make rent payments, damage to the property, and potential legal costs make finding good tenants into the make or break issue.
Investing Prior to Construction. This is a highly speculative and very risky sort of property investment that has booms and busts. Many investors recently discovered exactly how risky this endeavor actually was with the bursting of the property value ‘bubble’. The risks involved in this type of investment should not cover up the fact that many millionaires have been created through pre-construction investing and many more will be created in the future. Pre-build investing, just as its name implies is a type of investment in which investors purchase ‘options’ on the property before ground is broken. This is very popular in high demand areas that are known to experience housing shortages as prices often rise quickly and the units are often sold before they are completed and any ‘real’ money exchanges hands.
Flipping Properties. This is a type of property investment that has grown by leaps and bounds in the recent past thanks to the large audiences for the many popular home improvement and house flipping shows on cable networks in the last few years. More and more people have decided to pursue this sort of investment in hopes of creating big profits in a short amount of time and with minimal investment. Of course the problem is that it always looks much easier on television than it is in real life. Couple this with the fact that many people have unrealistic expectations when it comes to costs and ability and there are plenty of other risks involved with this type of investment as well. For those who are successful however, there is the potential for great profit in a relatively short amount of time as these televisions shows indicate.
The Buy-and-Hold Approach. As mentioned above, real estate has been tending to gain value over time. Even if the buildings are in desperate need of TLC and repair the very land they are standing on is more often than not gaining value as the years pass by. Purchasing large lots of land or even several houses and holding on to them for as long as possible before selling can often fund college educations for children, pay for weddings, or greatly supplement retirement funds. The longer these properties are held the better in most cases as this provides the greatest opportunity for the value of the property to increase.
The Lease Option. There are few people in this world who never experience rough spots financially. Many of these people are denied traditional home loans because of their inability to cover debts properly in the past. For this reason they are often willing to pay for the privilege of rebuilding their credit while working towards a path of home ownership. For these people, a lease option presents a workable and often valued solution. Those investors who are willing to take the risks often find the rewards are well worth those risks.
These are some of the most common ways that real estate investors are involved in this market. With the population growing and aging, there is a growing demand for housing. On the supply side, there is a limited amount land on which it is feasible to build and live. There are other investment opportunities that exist for those who are interested in real estate for an investment avenue, including the increasingly popular Real Estate Auctions. There are commercial real estate opportunities that have the potential to bring in big profits as well as the development and planning of housing communities as well. Needless to say real estate investing offers many opportunities to the savvy investor.