Unequivocally, the real estate market does not have a set trend that it would follow without a glitch. There are slumps and then there are ascents. If all you hope for is to make money via appreciation of your asset, then you probably need to open your eyes to a plethora of other avenues that real estate offers for bagging significant profits. Peruse this primer on how to make money in real estate investing, in order to know about a few of such avenues.
The perceptive investor isn’t solely dependent on asset appreciation to make money. Here are a few other ways that you can make money in real estate investing:-
Positive cash flow from a credible tenant – The rent typically covers the mortgage payment, insurance, taxes, etc. Having paid all that, the amount remaining is your income for the month. A discreet investor would normally have money in reserve, in order to cover the mortgage expense when the property is vacant.
Fixer-upper – This is probably the most favored and the most lucrative form of real estate investment. For instance, you could purchase a property for $70,000 and spruce it up by putting in another $30,000. And then the renovated property could well be worth $170,000 – a high yielding investment technique, isn’t it?
Buying at a wholesale rate – When you purchase a property well below market price, you effectively set the stage for a huge gain when you eventually sell it. Such properties can be bagged at either the pre-foreclosure or foreclosure stage. Since the homeowner is financially distressed, the investor has a great chance of purchasing the property for a bargain price.
Tax deductions save an awful lot of money – As the saying goes, money saved is money earned. Since real estate investment offers a host of tax benefits, the investor has access to increased equity.
Amortization results in equity growth – Say you purchase a property with only 20% down payment and the rest being mortgage finance. Then you find a tenant who provides you monthly rent, which can be used to pay off the debt. As the mortgage debt shrinks, the equity increases. Once the debt is fully paid off, the investor holds 100% equity in the property.
Rent appreciation – This is another excellent way to make money in real estate investing. As the cost of living increases, so should the rent of properties owned by you. Even a petty increase in the monthly rent provides greater cash flow on an annual basis.
Discreet management of assets – You must manage your assets diligently. If you don’t heed to your tenant’s complaints about a recurring problem, your tenant might very well leave the house. And with them would go the chance of positive cash flow. A vacant property simply eats away funds, which are needed for its upkeep. Therefore, proper asset management is crucial.
In a gist, there are a host of avenues that allow you to make money in real estate investing. It’s just that you need to be a bit creative and explore a few of these opportunities.
Copyright © 2006 Joel Teo. All rights reserved.