Real Estate Investing

If done right, real estate investing can be a very rewarding way to increase your wealth. Many people have amassed great wealth through real estate. And if you look at some of the most powerful people in the world you will see that they usually have real estate in their portfolios. One of the keys to successful investing is to fully understand the tax implications as well as finance and how you can leverage other peoples money. Donald Trumph is a perfect example of this and probably one of the worlds most famous real estate investors. However, you don’t have to be a “Donald Trumph” to make a lot of money investing in real estate.

Just like all other types of investments, one of the most important aspects to understand is the return on investment (ROI).  By definition, the ROI is the quotient of the annual revenue brought in by the investment over the cost of the investment.  In real estate investing, the ROI must be taken into account after considering other factors such as repairs, tax benefits like depreciation, and the possibility of getting higher yields through leverage.

Compared to bank deposits, investments in real estate decidedly have the edge, both in terms of capital appreciation and rate of return. Some people will argue that stocks have an advantage over real estate. However, when you look at the leveraging power of real estate investing and its tax benefits, shares of stocks will pale in comparison. Even though you can buy stocks on margin, it still does not compete with the leverage of real estate investing. Not only can you use other peoples money to purchase real estate but you can have others (tenants) pay it off for you.

In terms of risk, real estate is generally lower risk than stocks but with the recent past crisis banks are understandably tightening their lending guidelines. Real estate does have some risk but like with any investment vehicle you just have to do your research. Stocks tend have the highest risk because of their fluctuating.  Sudden business disasters can have tremendous adverse effects on your stock market investments. But conversely, they can also potentially reap handsome dividends in a comparatively shorter period of time.

Real estate investing, meanwhile, rises in value at a slow and sturdy pace as consistently proven during the past 3 centuries where the value of real estate is seen to have doubled for every 8 – 12 years. One of the exceptions, of course, is the market crash from 2007 to 2010 where real estate values dropped by 5 to 15%, or more in market value.  However, real estate still did much better than stocks, which nosedived to as low as 50% of the original value.

Here is one point to consider – when investing in real estate, in most cases, you actually make money you buy rather than at the time you sell.  After all, a lot of people are willing to sell their properties below the market value especially when they are in a rush to liquidate their assets.  You cannot buy stocks at lower than market value; neither can you buy jewels, gold or diamonds that way.  This is only possible in real estate investing and you can make loads of profit by knowing how to buy properties right.