Many people believe that investing in real estate means investing in a home but it is much more to that. In the USA, the trends of investing in real estate have increased over the last 50 years. Today, it has become a common vehicle for investment. It is true that the real estate investment market does give you the scope to earn a lot of profits however investing in real estate is really more complicated and complex over investing bonds and stocks.
Understanding real estate as an investment
It is very important for you to understand the importance of real estate as an investment. Real estate specialist in the USA, Dan Leimel Jr– Founder of the reputed Pelorus Equity Group in the USAsays that real estate investment is as old as land ownership. Most of the time you will find that in basic rental real estate a person will buy the property and rent it out to a tenant. The costs of maintaining the property is borne by the landlord. Most of the time the landlord often charges that much of rent to cover the costs of maintaining the property. He may charge extra to get profit.
However, it is wise and prudent for the landlord to charge that much of rent that is needed to cover the costs of mortgage and once this is paid, the maximum amount of rent automatically becomes a profit for the landlord. This is why Dan Leimel Jr says that the most common strategy is to be patient and wait as with time the property also gathers appreciation and this leaves the landlord with a better valuable asset.
Dan Leimel Jr also says that there is a downside to the above and if you are not careful, you may end up with a bad tenant. This tenant may cause a lot of damage to your property and in the long run, you may end up with no tenant at all. This makes the cash flow of your property negative and you may have to scramble to cover all the mortgage payments that are left. Besides the above, there is the additional challenge of finding the right property. Here, you may have to select an area where the vacancy rates are not high and choose a place where rentals are on high demand.
Dan Leimel Jr emphasizes that the biggest difference between investments and other rental properties is the amount of time and work that you will have to devote to maintain your investment. For example when you are investing in stock, it rests in your brokerage account and increases in value with the passage of time. The moment you invest in real estate, there are several additional responsibilities that crop in when you become a landlord.This means when you are investing in real estate and wish to become a landlord to pick up your mortgage, it is important for you to be prepared for emergencies like when the furnace stops working in the middle of the night- you should be ready to pick up calls and call the handyman for fixing it for your tenant!