There's no reason not to get excited with properties like your Washington real estate agent. Just like brokers, you too, can participate in the housing market and earn big. It takes guts, research, planning, and a bit of time.
Investing in real estate has become increasingly popular in the last fifty years. True – details can be so much more complicated than average stocks and bonds; but the rewards and learning opportunities are priceless! Before diving into the fast-paced industry, here's a quick overview of what investments to look into.
This is the most conventional method of earning from real estate. As old as landownership itself, this is how most folks get a piece of the property pie. Basically, a person (the landlord) rents out his home to someone else (a tenant). The monthly fees collected from the tenant should be enough for profit and other expenses such as mortgage payments, maintenance, and taxes.
Ideally, homeowners should wait patiently until the mortgage has been paid in full in order to really reap the earnings. Subtracting constant upkeep and taxes, the rest of the rent can become a good source of income. In some cases, property value tends to appreciate over time as well.
Real Estate Investment Group
This is a neat choice for seasoned landlords or busy bodies who cannot spare enough time for maintaining property. All you have to do is join a real estate investment company: they will act as landlords for you; taking care of the mortgage, tenants, upkeep, and unit vacancies. In return, they are paid with a percentage of the monthly rent.
Like the name suggests, this strategy involves buying properties and then reselling them for profits. Also called 'flipping', the objective is to get an undervalued home out of your hands within three to four months (and no longer than that). The downside to this plan is that it involves careful consideration.
Undervalued homes typically require repair and thus, have to be factored in during the negotiation process. You have to make sure that reselling the property will gain you more money than you lose. It's a fast-paced game normally played in hot markets like DC real estates.
REIT's and Leverage
These investments are a bit more complex and might require some experience with stocks and trading.
REIT or real estate investment trust is when large corporations use investors' money to buy and manage income properties (like condo units or commercial buildings for rent). These REIT's are then sold like regular stocks. It's bankable because these companies are required to pay out 90% of their taxable profits as dividends (defined as a portion of a company's earnings) to its shareholders.
Leverage is a bit like REIT but costs less. Technically, investors need to pay the full price when buying stocks on the market; but with leverage (using other financial instruments like borrowed capital) some real estate can be bought with only a fraction of the cost. Over time the mortgage will eventually be paid, and you still control the property.