Sunday, January 25, 2015

Types of Real Estate Investment: Part 1

One can invest in real estate in a variety of ways. Listed below are two common forms of property investment, both involving ownership and maintenance of the property: real estate trading and renting.


Real Estate Trading
Popularly known as flipping, real estate trading involves buying property and selling it for profit, ideally within a short span of time. Investors engaged in this trade may also structurally and/or aesthetically improve upon the property to boost its value, a strategy most common (and often required) in the case of foreclosures. Another strategy, called “buy and hold,” involves purchasing and holding on to a property until such time that it can be sold for greater profit, thanks to an increased market value. 

Renting
Renting out residential, office, or industrial units, among others, is a form of property investment. A basic rental consists of a contract between the landlord, the owner of the property, and the tenant, the party paying to live or operate in the property. Investment returns come in the form of monthly rent and other dues, as required. Given a rental setup, investors must make sure that monthly rent yields them significant profit over time. Additionally, investors can opt to put up their property as a rent-to-own (RTO). In an RTO contract, a tenant pays much higher rent with additional fees for a term of a few years. Once the lease ends, the tenant is given the option to buy the property. Should the tenant walk away from the purchase, the investor gets to keep previous payments made toward the property.


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