With REITs and 1031 Exchanges, real estate investing can be confusing landscape. But It's also a fun and challenging opportunity. What exactly is it, and why has it made so many millionaires in this latest boom?
Anytime you purchase real estate for a profit, you're participating in real estate investing. Many individuals have made it a full-time career, though anyone can become an investor and still keep their day job. But like any investment, be that stocks, bonds or business ventures, you're taking a risk. Real Estate being such a costly investment, your risk can be substantially greater. Those willing to ride the tide and stay calm through the industry's ups and downs have been known to earn substantial profits.
Real Estate investors typically fall into two categories:
1. Those who buy property at low or below market prices, fix this property up and sell it for a profit
2. Those who buy property to lease for ongoing revenue
The first group of investors tend to seek out foreclosures or fixer-uppers, urgent sales due to death, divorce or job transfers, spending between six months to a year making necessary repairs and high-yielding cosmetic improvements from curb appeal to completely new bathrooms and kitchens, porches and paint. When the property hits the market again, these investors strive to not only recoup the expense of the purchase and renovation expense, but also reap a sizable profit for their time and effort. The second type of investors often find themselves in the role of property manager, collecting rents, ensuring property maintenance and ongoing tenancy. This may include residential or commercial property leasing.
The real estate industry tends to be a relatively safe, long-term investment with predictable profitability potential. If you're looking to cash in, watch the market and do your homework. Then give it a try.
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