Real estate investing involves holding, acquisition, and sale of rights in real property with the anticipation of using cash inflows for impending future cash outflows and thus generating a favorable rate of return on that asset.
More beneficial then stock investments (which generally call for more investor equity) real estate investments offer the benefit to leverage a real estate property heavily. In other words, with an investment in real estate, you can use other individual’s money to expand your rate of return and control a much larger investment than would be achievable otherwise. Furthermore, with rental property, you can practically use other people’s funds to give back your loan.
Certainly, capital is required, there are risks connected with investing in real estate, and real estate investment property can be management-intensive. However, real estate investing is a source of capital, and that should be enough incentive for people to want to get better at it.
Understand the Elements of Return As Provided by Gene Bernshtam
Real estate is not acquired, held, or sold on sentiment. As such, prudent real estate investors like Gene Bernshtam always think about these four basic elements of return to settle on the potential benefits of purchasing, holding on to, or selling a revenue property investment.
- Cash Flow – The sum of money that comes in from rental fees and other income less what goes out for debt service and operating expenses (loan payment) determines a property’s cash flow. You are purchasing a rental property’s income stream, so be certain that the numbers you depend on later to calculate cash flow are correct and truthful.
- Appreciation – This is the escalation in value of a property over time, or future selling price taking away original purchase price. The basic truth to comprehend about appreciation, nevertheless, is that real estate investors purchase the income stream of investment property. Therefore, it stands to reason, that the more income you can sell, the more you can expect your assets to be worth.
- Loan Amortization – This means a sporadic lessening of the loan over time leading to increased equity. Because lenders appraise rental property based on income stream, when purchasing multifamily property, present lenders with concise and clear cash flow reports. Properties with earnings and expenses represented correctly to the lender increase the chances the investor will find a favorable financing.
- Tax Shelter – This indicates an authorized way to use real estate investment property to diminish annual or final income taxes. No one-size-fits-all, though, and the practical real estate investor should check with a tax professional to be certain what the present tax laws are for the investor in any exacting year.
Create a rapport with a real estate professional like Gene Bernshtam who knows the local real estate market and comprehends rental property. It will not advance your investment objectives to spend time with a representative unless that individual knows about investment property and is effectively prepared to assist you to correctly acquire it. Work with a real estate investment professional.