What is Real Estate Investing
Everyone that owns a home is a real estate investor. In fact, for many people the investment in owning a home is the largest investment they may ever make. However, other clever individuals take real estate investing further and some make a career out of becoming a real estate investor.
Some of the most popular investments include:
- Owning Rental Properties – This is frequently the first step when a real estate investor gets started. They buy a property with the intent to rent it to others.
- Flipping a Property – In this method, a property is purchased with the intent to re-sell it. Profits come from buying the property at a low enough price that after adding the costs of the necessary repairs and renovation, there is still a profit from selling the property.
- Lending Money to Others – Investors of this type focus on the profit potential in lending money to others for real estate projects. Investors with large amounts of money may lend it out as “hard money” (high-interest rate) loans backed by real estate, to borrowers than do not qualify for conventional mortgage financing.
- Real Estate Crowdfunding – Smaller investors may participate in a large real estate project through crowdfunding offers, which pool investors’ money together. These offerings typically have a small minimum investment requirement of only $5,000.
- Investing in REITs – Real Estate Investment Trusts (REITs) are large investment funds that typically own significant real estate portfolios. REIT owners get a proportional distribution of the profits, according to the percentage of ownership an investor holds, after the deductions of authorized costs and fund management fees.
Land Speculation – Profits in land speculation come from holding onto the land until it increases in value or by getting approval to subdivide and sell the land in smaller, profit-making, parcels. - Short Sales – To avoid the costly legal foreclosure process, banks and others, who own property that is about to go into foreclosure, may put the real estate on the market at a bargain price. This short sale price is far lower than the current market value of the property. Short sales are an opportunity for those investors capable of paying cash for the property.
- Real Estate Auctions – Real estate auctions happen for various reasons. These include bankruptcies, law enforcement confiscations, or to simply sell the real estate to the highest bidder as quickly as possible.
- Tax Lien Certificates – When the property taxes on a particular property are not paid, the tax authority may auction off the delinquent tax balance as a “tax lien certificate.” If the tax lien certificate, with accrued interest, is not paid by the current owner of the property within a specific period of time, the ownership of the property transfers “free and clear” to the holder of the tax lien certificate.
Summary
These are just a few of the interesting ways to invest in real estate. Careful analysis is necessary to avoid losses. Nevertheless, real estate investing can be very satisfying and financially rewarding for many.
References
Exploring Real Estate Investments: Types Of Real Estate
http://www.investopedia.com/university/real_estate/real_estate2.asp
Types of Real Estate Investments
http://beginnersinvest.about.com/od/realestate/a/Types-Of-Real-Estate-Investments.htm
Real Estate Investments: Niches and Strategies
http://www.biggerpockets.com/real-estate-investing/strategies-niches