Real Estate Investments: A Guide

For a person with a sense of adventure and money to get started, real estate investment is a rewarding business venture. Before spending money on real estate, it's important to learn about the trade. If you're just beginning down this path, here's what you need to know.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.

Why Invest in Real Estate?

Depending on the type of real estate that a person invests in, real estate can make money in a variety of ways. Many people invest in property hoping that over time it will appreciate in value.

Often, appreciation happens naturally, provided that the landowner is performing regular maintenance. Owners can increase their property's value by remodeling and upgrading the structure. When the time comes to sell, the property owner is able to make a healthy profit which enables them to buy another property and continue the cycle.

This is what many homeowners do: they buy property hoping that one day they can sell for a profit and buy a nicer home. Paying a low price for the property is an important part of making a profit. Working with a skilled real estate agent who can successfully negotiate a good deal is important.

In addition to this basic type of investment, there are two other ways to make money on real estate.

• Rent. Monthly rent provides ongoing income to property owners.
• Ancillary cash flow. This is what property owners make on income not directly related to the value of the property, like money made from vending machines.

Different Types of Investments

In addition to the different ways of making money off of their investment, there are also different types of real estate investments.

Residential Real Estate

Many beginning investors will get their start in residential real estate. Residential real estate investments vary between single family homes and multi-family properties (apartment buildings). Often, money is made by renting. Sometimes investors purchase residential real estate for the purposes of flipping the property.

When considering investment in residential real estate, the following factors must be considered:

• Demand for housing in the area.
• How much it will cost to purchase a residential property, and how much profit can be made by selling the property.
• Neighborhood desirability in terms of shopping, parks, etc.
• Neighborhood accessibility and commute times to employment areas
• Economic health of the community.

Often, homes for sale in Westmount are in high-demand urban areas where the economy is stable and jobs are abundant are the safest investment. These areas can be expensive, and many investors find it difficult to get started with their first property in high-cost areas.

In areas outside the boundaries of a city, property may be less expensive. Investors who have little startup capital may find it easier to get started with real estate investment in these neighborhoods.

Commercial Real Estate

Commercial real estate can also be broken up into categories.

Office Buildings

Office buildings are generally a stable source of income for property owners, because even when one tenant moves out, the property will continue to make money as long as other units are still being rented.

Retail Space

Retail space, including restaurants, can be a good source of income in the right neighborhood. Often the property owner must invest in the property (through renovations, remodels and regular maintenance) to keep the business space nice and attract customers. This helps ensure the business will be successful and the tenants will continue to pay rent.

Industrial

Industrial real estate can be very lucrative, especially if the industrial site is tailored to the client. Some tenants may need special equipment to be installed on the property, for example. Property owners who make special adjustments to the property can charge extra for the accommodations.

Investment Loans

Getting a loan for a real estate investment is not the same as getting a loan for a primary residence. Someone who hopes to get a loan for a real estate investment must have a real estate investment plan, good credit, a hefty down payment, proof of income, financial stability and money for a financial emergency.

Anyone hoping to get their start in residential real estate must talk to a qualified lender. A good lender can answer a property buyer's questions and can also give buyer more information.

Contact A Real Estate Agent In Your Area

If you're ready to get started with real estate investment, contact a real estate agent in your area. Your real estate agent can help you decide which type of real estate investment is right for you, and what needs to be done to get started in the industry.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.