Property Investment Basics For Real Estate
A Real property is defined as a property consisting of land and buildings on it. This includes the natural land resources like livestock, crops, water, mineral deposits etc. The real estate career has become a multi-billion dollar industry around the world. It is highly ranked as the most profitable lucrative business that investors can venture into.
This is one area one can really get a lot of wealth regardless of whether it is an investor or a real estate agent. With the technology available today, chances of succeeding are quite high.
Before getting into the business, it is imperative to understand the Real property dynamics. There are different types of Real property. It is placed in different categories.
Real property Categories
Most people are familiar with Homeownership as the most common category of real property. It is the first thing that comes into their minds when they hear the term. It is otherwise known as owner-occupancy.
If an investor has the interest to buy a home, there are a variety of options to choose from. There are variable-rate and fixed-rate mortgages. The difference is that the borrower will be required to pay high rates for a fixed-rate mortgage. This can be costly in a short run because loans for a fixed rate cost more. They are normally protected from an increase in interest rate in the future.
Commercial Real property is another category of Real property. Here the property is used for commercial purposes just as the name suggests. This includes a shopping mall, restaurants, and office buildings among others. Make no mistake commercial real estate is totally different from industrial real property. Many people tend to confuse them the two.
Industrial Real property. Industrial real property is simply an area or space that is used for product manufacturing, warehousing, storage, or distribution. If one has plans to sell industrial property, it’s worth consideration of leasing it first, before making the decision to sell. In a long-term, leasing is more profitable than selling.
Leases for commercial purposes generally are longer compared to leases for residential purposes. Commercial Real property returns are calculated on the basis of profits per square foot. The investor will be required to pay a hefty down payment on a mortgage for commercial Real property compared to a residential Real property.
Best Practices in Real property investment
When an investor wants to invest in the business, it is possible in two ways. One is by either buying directly the actual property e.g. a piece of land or indirectly by purchasing shares in a Real property investment trust. In addition, an investor can acquire property by buying mortgage-backed securities.
For centuries, some things have not changed in the Real property business. Throughout history, profit and losses can be inquired through the following ways.
1) Revenues from leases and rent
2) Appreciation or depreciation of the Real property value.
Appreciation is more common of the two. Appreciation comes in different ways. For instance, when one discovers valuables at the property like oil and gas, minerals or just by the fact that a rise in price and value occurs.
When a residential area such as a neighborhood grows, it tends to increase the value of property in that area. Scarcity can also be a major factor in the rise of a property level.
Knowing what to expect in a Real property will always provide an edge ahead of everybody else. Market trends are some of the major keys that should always be looked at.
Always do your research first whether it is a buying or a selling venture. A person with experience in the Real property business can offer important information and interpretation. This will provide the ability to estimate equity potential of a property. Although in this business there is no such thing as a guarantee in history repeating itself, it is still the best wealth-building tool in the history of mankind. For more tips about buying or selling real estate, contact your local trusted Realtor for assistance.