subject: Should You Invest In Real Estate? [print this page] The global crises may be slowing down today but the real estate business continues to become very promising especially to investors who are ready to spend time and money. Real estate investing offers a high profit potential. Rehabbing houses, for instance, is one of its hottest trends today. Investors buy a property at a good price, improve the house and sell it later on at a profitable amount. If you still cant decide whether real estate investing is for you, below are some good reasons why you got to give it a try.
Leverage Leverage can provide you with great returns. This may be very risky so it is very important for you to understand how it can affect your own investment.
Pay up loans To increase leverage, simply pay up your loans. This frees up investment resources. Other investors also use increased equity in one property to free up funds which he can use to invest in other deals.
Improve property for equity A lot of investors invest properties sold at a good value even if they need further improvements. They use this as an opportunity to rehab houses and sell it later on at a much better price. Early on, investors should have calculated the total costs of the improvements which should result to an immediate increase in equity.
Rental - The rental yield is the amount that you get directly from your rental income. It may be calculated either as net or gross. Generally, experienced investors calculate the net of your rental incomes by taking out expenses, taxes and other costs and dividing it by the property value. This may result to a negative cash flow since it usually does not include mortgage payments.
Appreciation Properties usually appreciate in value through time. This allows you to have higher sales and more reinvestment opportunities in other properties. It also gives you the chance to provide an equity line of credit which you can use for other investments.
Inflation is rent-friendly Rent can increase with inflation and mortgage payments on your home can remain stable. This increases your cash flow and rent income without going beyond your regular expenses for property maintenance. Inflation also allows you to take more renters since it can negatively impact the affordability of your property.
Yes, bonds and stocks are sensitive to inflation. They simply involve non-existent dividends and value appreciation potential. Despite of this, real estate investing remains to be very promising, providing a lot of lucrative investment opportunities.
