By: Juhlin
Youlein
Real estate is a legal term used to refer to objects that
are fixed or immovable such as the ground we walk on. Estate is a term that can
be used loosely to describe a sum of assets but the "real" means the
assets that are real and tangible unlike stocks or other forms of financial
investments that are popular in a capitalistic world. In the earlier time of
the country, real estate was usually something that was purchased for a home or
for ranch or farm land. In the last half century, real estate has become an
effective medium of investment. Since world war two, more and more investors
use real estate to hedge their portfolio.
Because of the "real" ness of buying and owning real estate, the actual transaction process of buying and selling it is more complicated and difficult making it less convenient than buying stock or other investment mediums. Therefore those who wish to invest in real estate are going to have to get there feet a little more dirty and take a more active role in the management of that property.
The most popular or common form of real estate investment is renting. Renting is a wonderful way for an investor to put up an initial cost and then have a rather large return. Renting is the most ancient of the real estate investments as it has been around as long as individuals have owned property. Renting is where an investor will buy real estate or own actual property and instead of living in the home, they rent it out to tenants. The owner is still responsible for the repairs, the taxes, the insurance, the mortgage, but with the right circumstances, the owner will be able to charge enough from their tenants to pay down all the costs and maybe even a little more actually making a monthly profit off of the renter. Usually the owner will not make a monthly profit until the mortgage is completely paid off and then the money the tenants pay is pure income.
Usually the way that a renting property will really earn money is the natural gain in equity that comes from the historically consistent gain in value real estate experiences over time. The more and more that land becomes increasingly scarce, the more the value will rise and since 1940 the value of real estate has slowly but significantly risen each year. That means that if a tenant pays the bills on a home for enough years the investor will not have to put any money of their own into the home after the initial buy and that they could potentially harvest a large amount of money when the home is resold years down the road.
Rental properties come with a negative side of course. One, the easiness of maintaining the property has a lot to with the easiness of the renters. Tough tenants make a tough investment. Tenants don't make their payment and then the owner is out a months mortgage to pay on the home. Also, there is the risk that a neighborhood will not attract renters at all due to low demand or too high or rent. Lastly, maintaining a rental property does take a lot of work and sometimes that is not what a investor wants to deal with.
Because of the "real" ness of buying and owning real estate, the actual transaction process of buying and selling it is more complicated and difficult making it less convenient than buying stock or other investment mediums. Therefore those who wish to invest in real estate are going to have to get there feet a little more dirty and take a more active role in the management of that property.
The most popular or common form of real estate investment is renting. Renting is a wonderful way for an investor to put up an initial cost and then have a rather large return. Renting is the most ancient of the real estate investments as it has been around as long as individuals have owned property. Renting is where an investor will buy real estate or own actual property and instead of living in the home, they rent it out to tenants. The owner is still responsible for the repairs, the taxes, the insurance, the mortgage, but with the right circumstances, the owner will be able to charge enough from their tenants to pay down all the costs and maybe even a little more actually making a monthly profit off of the renter. Usually the owner will not make a monthly profit until the mortgage is completely paid off and then the money the tenants pay is pure income.
Usually the way that a renting property will really earn money is the natural gain in equity that comes from the historically consistent gain in value real estate experiences over time. The more and more that land becomes increasingly scarce, the more the value will rise and since 1940 the value of real estate has slowly but significantly risen each year. That means that if a tenant pays the bills on a home for enough years the investor will not have to put any money of their own into the home after the initial buy and that they could potentially harvest a large amount of money when the home is resold years down the road.
Rental properties come with a negative side of course. One, the easiness of maintaining the property has a lot to with the easiness of the renters. Tough tenants make a tough investment. Tenants don't make their payment and then the owner is out a months mortgage to pay on the home. Also, there is the risk that a neighborhood will not attract renters at all due to low demand or too high or rent. Lastly, maintaining a rental property does take a lot of work and sometimes that is not what a investor wants to deal with.
Juhlin Youlien writes about Gilbert AZ homes for sale and Paradise Valley AZ homes and other real estate like Chandler AZ homes for sale and Surprise AZ homes for sale.
source: Isnare.com
source: Isnare.com
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