Real Estate Investment The Supplementary Investment Game Continued…
Investing in real estate is so much more than just finding a place to hang your hat; Investing in real estate can be a real wealth building vehicle.
In the context of portfolio investing, real estate is often considered an alternative investment class. Traditionally that means that it is a supplementary investment, which is used to build on a primary portfolio of stocks, bonds and securities. Though real estate marketing has a multitude of opportunities for making huge gains, investing in real estate is a bit more complicated than investing in the stock market, regardless of which approach you take to making your real estate investments work for you.
Previously I talked about a few of the different ways that you can make real estate investing profitable. Today, I’d like to introduce a few more.
Real Estate Investment Groups
Real estate investment groups are organizations that develop or purchase properties and then sell them to real estate investors; they are similar to mutual funds in that spreading it around minimizes the risk factor. The real estate investment group finds tenants, handles maintenance and other property management responsibilities and the organization collects a portion of the monthly rental proceeds. Most groups include a provisional requisite that investors must pool a portion of their rental proceeds in order to cover mortgage payments in the event of vacancies.
Other than Real Estate Investment Trusts (REITS), investing in real estate allows an investor one benefit that is not available to those who invest in the stock market: leverage. If an investor wishes to purchase a stock, they have to pay the full value of the stock at the time of purchase. Even if buying on margin, the amount that can be borrowed is still much less than with real estate. Most conventional mortgages require 25% down; However, depending on the area in question, there are other types of mortgages that require as little as 5% down; what that means is that the investor can control the whole property, along with the equity, by only paying a small portion of the total value.
Similarly to day traders, who are in a completely different league than their stock exchange counterparts, the buy-and-hold investor, real estate traders are the ones who walk on the wild side of real estate investment, opting to buy properties with the intention of holding them for just a few months, and then sell for a profit, rather than holding them for rental income. There is significantly higher risk in this type of real estate investing, in that the real estate marketing is generally in constant fluctuation; however, most real estate traders invest in properties that are significantly undervalued or are in particularly hot markets.
Despite the increased learning curve that is required for real estate investment, as compared to traditional stock trading, real estate investing can be incredibly profitable, less risky if done with the right guidance, far more interesting and well, frankly, significantly more FUN than investing in the stock market. With such a mixed bag of possibilities to building wealth with real estate, the exploration of this richly diverse pursuit alone is worth the study time, effort and investment because it is just so darn stimulating.