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Real-Estate Investing: the Best and Worst Markets
Looking to snap up some investment properties on the cheap? You may want to consider Durham, N.C., Indianapolis and Huntsville, Ala. They are among the best places to invest now, according to a new re [...]
Keywords: investment properties, real estate, lenders, housing market, mortgage, short sales, bank owned
Listed property opens its doors
TWO years of very little property development activity has opened the door to some attractive opportunities for listed property investors such as Mark Ferguson.
A portfolio manager with [...]
Keywords: property investors, global economy, Real estate, property investments, economic growth, commercial property, real estate investment,
New Foreclosure Investment Program Is Win-Win for Homeowners and Passive Investors
First Fidelity Homes’ foreclosure investment program provides investors with a 16% annual return and creates affordability for home buyers.
As stocks remain volatile and real estate v [...]
Keywords: home buyers, real estate, foreclosure investment, investment program, investment strategy, homeowners, US economy, foreclosure investing
Our Foreclosure Services includes processing non-judicial Foreclosures in CA and NV, and coordinating Foreclosure Servicing nationwide within very tight timelines and with preferential pricing to provide significant benefit to FCI clients.
Fci Lender Services offer a Loan Servicing comprehensive platform with fully integrated solution that gives Private Money Lenders, Private Money Brokers and Mortgage Fund Managers access to all the loan information and see payments received, funds disbursed, Late Letters, collection and account notes as they happen.
Real Estate Investing is a Secured Investment
An Alternative To Traditional Stock Market Investment
What is the secured investment? Are you looking for something more secure than the stock market? Investing in Real Estate is indeed a “secured investment”. Unlike the stock market, a house is a tangible asset which we renovate and either tenaciously manage, or resell.
From a historical perspective, investing in real estate is almost as old as the construction of property itself. Indeed many business owners who created their wealth through companies then went on to diversify into real estate investments. In fact, over the years real estate investments have produced similar returns to those found in the stock market. Let’s take a look at some of the reasons:
First of all, and most obviously, the supply of building land around the world is limited, even when taking into account landfill opportunities. Since the world’s population is growing and the demand for housing ever increasing, then there would seem to be a never-ending and increasing requirement for real estate of all types.
Now let’s take a look at the mechanics of buying property. Here it can be seen that investing in real estate is quite different from most other traditional investments such as stocks. With real estate you can often borrow up to around 80 percent of the value of a property, sometimes even the full value and beyond under special circumstances. Thus a more modest investment of say 20 percent of the value can be used to buy and control the full value of the larger investment. Naturally, if the value of your investment increases, I.e. property prices rise, then the value of your real estate investment also increases. If so, then you are into profit, including that on the money you originally borrowed.
Naturally, there will be costs associated with real estate investing (such as legal fees and property maintenance, taxes, etc), but these are usually small in comparison with the potential gains.
Borrowing in order to invest in real estate makes real estate a type of leveraged investment. But if you know anything about leverage, you will realize that leveraged investments can also go against you. What, for example, if the property you purchased for $300,000 decreased in value to $240,000? Even though the value only dropped by 20 percent, you actually lose 100 percent of the original $60,000 investment. And if you have a mortgage on this property making up its full purchase price, you will actually need to pay money to the mortgage provider in order to cover the costs of selling the property. That’s in addition to the loss of the whole of your initial investment.
So, as you see, investing in real estate is something to be taken very seriously and should not be done with money which you might need for other things in the near future. Investment in property is more secure as a long-term investment. In the above example, if you could have held onto the property and not sold it, the loss would purely have been ‘on paper’. In all likelihood, over time the value of the property, unless grossly overpriced when you originally bought it, will rise and you will likely not only recover the full value of the initial investment, but also possibly make a nice profit when you do come to sell.
Another reason that real estate is a secured investments is that there are profits to be made from it whilst you are the owner. In addition to the tax-saving benefits (in that any tax due on the property’s increase in value doesn’t become due until it is eventually sold), you can also make additional money from renting out the property. This can often cover all your running costs of the property, plus providing a profit on top.
Unless you make a large down payment, early on during your ownership the monthly operating profit from your property business is likely to be small or non-existent. But over time this profit will increase as the amount of rent you can charge increases at a higher rate than the running costs. Naturally these profits will be subject to normal income tax rules.
A further benefit of investing in property is that you might be able to purchase cheaply a run-down or ‘distressed’ property and fix it up or develop it further. Properties like this can still be found if you look around carefully. Naturally, investing in this type of real estate can still produce large gains. This is something you certainly can’t do with traditional stock market investments.
However, returning to the initial question about whether real estate investing is still a viable option when current prices seem to be nearing their peak: yes, it can still be a secured investments, but you might need to be more creative and prepare to be in for the long haul. Property ‘flipping’ methods that worked extremely successfully yesterday, might not work at all well tomorrow.