A Brief Guide To Real Estate Investing

Karleia Steiner

July 14, 2014

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The term "real estate investing" refers to the practice of buying a property in order to make a profit. There are several reasons why investors choose real estate over other investment options.

How to Make Money by Investing in Real Estate

Before investors start looking for an investment property, they must first decide what type of investment will suit their needs. Listed below are some of the more common ways of making money from real estate.

1. Buy a rental property.

When investors buy a rental, they get tenants to move into their property. The rent paid by the tenants will cover the mortgage payments and perhaps make the investor a profit.

This is an excellent option for those who are looking for a long-term passive income. However, running a rental property is not all fun and games.

Investors will have to manage their property, keep records for tax purposes and ensure that their home has a tenant in it at all times. They will also be responsible for maintenance and repairs.

If homeowners do not have the time to do the above tasks, they can hire a property manager. As this service is not free, investors will have to weigh up the cost to benefit ratio before they make a decision.

2. Buy a Property and Sell It

Another way to earn money from real estate is to buy a property and sell it for a higher price. This method tends to provide the best returns in high demand areas. For example, investors are more likely to make a profit in a place like NYC than they are in Kansas.

3. "Flip" a House

Flipping a house is the practice of buying a low value house, increasing its value and selling it for a profit. The value of the property is usually increased by the renovations. Homeowners need to be careful that they do not invest too much money into repairs and renovations. If they do this, they may lose money instead of making a profit.

How to Buy the Perfect Investment Property

Unfortunately, buying the right investment property is harder than it seems. In popular areas, housing is in short supply. As a result, investors need to act quickly.

So, how can investors buy a property that will turn a profit? All they need to do is consider the following issues when they are viewing properties:

Where the property is located. Does its proximity to schools, public transport lines etc. increase its value?
Are there any visible signs of rot and/or pest infestation?
How much work does the property need?
What is the asking price and is the buyer prepared to negotiate?
How can the investor get maximum value? For instance, if the home is on a big piece of land, the owner may be able to subdivide it.

Once buyers have found a property they love, they can put down an offer. Most investors will need the help of a lawyer to do this.

Written by Albin Poulsen from Laanekassen.dk.