One of the ways where you can earn money and equity is by investing in real estate. However, it’s not all glitz and glamour because you have to work hard for that property for as long as you have it.
Don’t let this deter you from that investment plan because there’s something good that will come out of it. Know more about all of these as you browse through MRG World Projects.
Real estate investing in a nutshell
The main appeal of investing in real estate is the passive income you stand to gain. Whether you’re going to rent out the space or make something out of it, the whole idea is investing capital so you’ll get money in return.
There are plenty of ways for you to invest in real estate and the key way to find what’s right for you is to research. Luckily for you, we’ve done the legwork of finding which one is the right fit for your needs.
Below is the list of real estate investment opportunities that might interest you:
Real estate investment trusts
Before you understand what this is about, you must learn what real estate investment trusts or REITs are. These are companies that own real estate in various forms. Whether it’s an apartment building, office, hotel or warehouse, as long as the company owns it, the property is part of a REIT.
It’s an easy way to get into real estate investment because you just have to purchase a share from the company and they’ll be the ones to manage logistics and upkeep. You can compare it to a mutual fund but instead of investing in stocks, you place your money in real estate.
So how do you earn money? There are two ways to earn money through REITs. The first one is by earning regular dividend payments from the company. It is the payment they give investors in intervals for funding their projects.
Another way is to sell your investments for a profit when the value rises much like how you do with stocks. You can easily do so when you invest in listings on major stock exchanges.
Residential properties
Buying your own house is a form of investment in real estate. You can either live in that property or rent it out as you wait for the value to increase. It’s also advisable to resell the house at a larger value.
Whatever you choose with that residential property is valid as long as you make sure that you get your capital’s worth. The challenge now is, how can you earn money when you can’t assure that the property will increase in value as the years go by.
One of the things that can help you out is renting the property at an affordable price. This way, you can earn cash flow monthly that can help you break even and pay for additional expenses.
If you choose to live in it then you can save money because you won’t have to pay rent every month to your landlord. The caveat to this is the dues you have to pay but there are tax breaks and other benefits that you can take advantage of.
Commercial properties
Just like how you rent out residential properties, you can do that as well with commercial properties. What you do first is buy a property, refurbish it and rent it out to companies that need space. When the value increases, you can resell the space for a hefty profit.
However, you have to be strategic with buying a property. There’s no assurance whether it’ll increase over time but with the right research, you’ll find the right strategy on how to increase your profits without having to sell.
These can include renting the space out to companies or converting it to warehouses wherein businesses can store their products. You should also consider the location of the property. Prime locations can also increase the value of your property over time.
Flipping houses
If you want a quick turnover of your profits, you can turn to house flipping. This is the term used for purchasing a home for a lower price, quickly renovating it and then selling it for a fast profit.
The key here is to purchase the right home at the lowest possible price so you’ll have the capital left to renovate the place. Moreover, you have to stick to a budget so you can still turn over a profit without losing time or capital.
You have to research before buying the property. Make sure that there are no major damages that can compromise its value. Impulsivity won’t get you anywhere that’s why you have to think this through before committing to the business.
Challenges in investing
Just like any type of investment, real estate investing has its own set of challenges. It’s not a game wherein you can recuperate your losses quickly when making the wrong decision. Whatever you do when investing in real estate can affect your life drastically.
It’s good to know the challenges that you might face when dabbling your hands in this kind of investment. Here are some that you should keep in mind:
Starting capital
Properties don’t come cheap. You need to have a solid financial plan and capital before you can even purchase a property for investments. Sometimes, you might even need to apply for loans or mortgages just to get by.
This shouldn’t deter you from investing in real estate. The profits come when you’re strategic and smart enough about your decisions. Researching which properties and how you can manage the payments can help you with this.
Location
Not every place can be a prime location for real estate investing. You have to do research and legwork just to find the right property to invest in.
For example, it’s not smart to buy land where prices are on the rise because you won’t get profit from there. Moreover, you might find it hard to lease the spaces when the property isn’t within the business district of your region.
Time and management
It takes time and patience to earn income from real estate properties. At the very least, you can earn passive income by renting it out while waiting for the land prices to increase. The best and quickest way to earn money is by reselling but the perfect timing can take years.
Reasons to invest in real estate
Although it’s a hard decision to make, a real estate is still a viable option when you want to gain passive income. There are plenty of other reasons for you to invest in this industry and they are:
Real estate has a high tangible value
Tangible assets or physical things including properties, equipment, computers and other valuable things are always worth investing in. That’s because they have a monetary value attached to them no matter what, unlike stocks.
Your investment in properties will always be worth something even when the market crashes. You won’t walk away without anything in your pockets because there will always be a market in this industry.
Building equity and diversifying your portfolio
One of the reasons people invest in real estate is the equity it provides. The longer you own that property, the higher your equity and value appreciation is. This can help you in so many ways, especially in leveraging.
How does that work? When you have good equity, you can set up a line of credit or a traditional loan easily. This can help you with larger finances like home renovations or college tuition fees.
Aside from that, you can also diversify your portfolio. When you’ve purchased a property, it won’t be hard for you to buy another because you already have equity.
Getting tax benefits
Selling the house won’t be taxed as an income. Instead, it’ll be taxed as capital gains which are typically lower compared to that of income. Some locations may even have fewer capital gains, especially if they are categorised as opportunity zones.
Earning regular cash flow
Renting out the property is one way to earn regular income. This is called passive income in the real estate market. How so? You just rent out the space and the tenant will pay you for staying there either monthly or quarterly, depending on the arrangement that you’ve talked about.
Allows you to pass down the property to heirs
If you’re not planning to sell the property, this becomes yours forever. You can pass it down to your heirs as a form of inheritance and income-producing asset. This can help your children have something to keep as a form of legacy that develops profit or sell it once the value appreciates.
A way to force save for retirement
A fixed loan gives you the chance to build equity over your home for a long period. By the time you choose to downsize after paying the loan then you can get a small beautiful house and a lump sum of money for your retirement.
This will only work if you’ve invested in a good property. That’s where research comes to play. You have to make sure that you’ve chosen the right one in a prime location so you can sell it at a higher price than you bought it for in the future.
Let MRG World Projects help you out in your search for the right real estate property!