There are many ways to create wealth in today’s world. However, one of the most accessible methods, even for the average entrepreneur, is real estate investing. In fact, you will find many stories of building something from nothing by investing in one form or another of the real estate market, if there are few ways to invest in this lucrative but risky area.
Real estate is a great strategy for investors who are willing to take the time to understand the options, risks and potential rewards involved in this investment process. Some of the more common types of real estate investments are as follows.
1) Rental properties. Real estate typically increases in value over time, unlike many other investments that can rise and fall quickly and without warning. The problem is that few people can really afford to hold and maintain multiple properties over an extended and indefinite period of time while waiting for the value to rise. Many property investors overcome this problem by renting out their properties to tenants during the period of rising property values. This allows the tenant to essentially pay the note on the property and makes it less risky, despite the risks involved in dealing with the tenant (such as property damage, non-payment of rent, and possible legal issues – good tenants usually outweigh bad ones).
2) Pre-construction investment. This is a highly speculative and very risky type of property investment that has had booms and busts. Many investors have recently discovered just how risky this endeavor can be when the real estate “bubble” bursts, so to speak. The risks involved in this type of investment should not obscure the fact that many millionaires have been created through pre-construction investing, and many more will be created in the future. Pre-construction investing, as the name implies, is a type of investment in which the investor purchases an “option” on a property before ground is broken. This is very popular in high demand areas where prices tend to rise quickly and the units are often sold before they are built and any “real” money is exchanged.
3) Speculation. This is a type of real estate investment that has made leaps and bounds in the last few years thanks to the popularity of many popular home improvement and house flipping shows on cable networks in the last few years. More and more people are deciding to pursue this type of investment in hopes of creating big profits in a short amount of time with minimal investment. The problem, of course, is that it always looks much easier on TV than it actually is. Add to that the fact that many people have unrealistic expectations when it comes to cost and capacity, and there are many risks associated with this type of investment. However, for those who are successful, it is possible to make huge profits in a relatively short period of time, as these TV shows show.
4) Buy and hold. As mentioned above, real estate tends to appreciate in value over time. Even if buildings are in dire need of maintenance and repair, the land on which they sit tends to increase in value over time. Purchasing a large lot or even several houses and holding them for as long as possible before selling can often provide funds for a child’s college education, pay for a wedding, or greatly supplement retirement funds. In most cases, the longer these properties are held, the better, as this provides the greatest opportunity to increase the value of the property.
5) Rental options. There are few people in this world who never experience financial difficulties. Many of these people have been denied traditional home loans because they have been unable to make regular debt payments in the past. For this reason, they are often willing to pay the price to rebuild their credit while working to achieve a path to homeownership. For these individuals, the rental option presents a viable and often valuable solution. Those investors willing to take the risk often find the rewards are well worth those risks.
These are just a few of the investment opportunities available to those interested in real estate. There are also commercial real estate endeavors that have the potential to be very profitable, as well as housing community development and planning. Needless to say, real estate investing offers many opportunities for the savvy investor.