Iotap Silambda

You’ve heard that investing in real estate can be very lucrative. Before you get started, here are seven questions to ask yourself.

1. 1. Is this a hobby or a business?

Ask yourself why you want to invest in real estate.

- Do you want another income stream

- Do you want to build equity in a house

- How many sellers and buyers do you want to speak with each day/week/month

- How much time do you have to invest in real estate

- Are you working a full time job

- Are you retired looking for additional income

- What do you want to do with your time?

If you want to build a real estate investing business, then you need to treat it like a business.

Are you going to be a landlord? Then you need to determine how much time you want to spend collecting rent, maintaining the property, making repairs, answering tenant calls late at night, etc.

Or have a property management company handle the tenants and maintenance? Then you need to determine who you will hire to manage your property and how much you will pay them. Typically a property management company will charge one months rent to locate a tenant and then charge 8%-10% of the monthly rent for collecting the rent and answering all calls from the tenant. You still need to set aside a reserve fund for maintenance.

Investment is very necessary for every person. Real estate is an asset form with limited liquidity relative to other investments. We invest in real estate with certain objectives in mind and there are:

a) Immediate requirement for residence purpose

b) To secure future requirements of family to avoid congestion, this will accommodate even division of family.

c) For earning rental income after proper construction or say investments in commercial properties.

d) To avail long term appreciation on investment in real estate.

To invest in real estate one must be conversant with its pros and cons. While deciding to invest in real estate, there are hundreds of things in mind but one must have proper knowledge about real estate market as blind investment in real estate may put the investor to huge losses.

We invest in real estate with above mentioned four objectives in mind and each objective calls for particular attention. If we are to invest for immediate residence then its proximity must have all basic amenities. If it is for future requirement then the basic facilities will be developed with the pace of time. If we are to invest in real estate for commercial purpose, the property must be surrounded by good habitation including industrial establishment and if the investment is done purely to avail appreciation in future then the location counts much as such type of properties can be agricultural land, far off residential, commercial or industrial plot as the main objective to invest in real estate is to get best returns/appreciation on log terms basis.

There are two very major differences between investing in stock and investing in real estate. When investing in stocks you are typically investing for capital gains versus cash flow and have no control. In stock you are investing for capital gains, for the hope that it goes up over time but with very little control over the value increase or decrease. Most people, other than those that invest for cash flow dividends, invest for capital gains in stocks. But without control or seeing any return on your money without selling you are in a losing situation. You should NEVER buy an asset that you do not control, unless the return on investment is substantial enough to balance out the control. Historically stocks have not averaged a high enough interest rate to justify the lack of control and increased risk. You have to be a professional stock investor, know some insider trading information and have some luck to beat the historic performance of stocks. In addition, as most people have seen in the stock market, half of your wealth can be gone literally overnight. Now if that is not a scary situation I don’t know what is. I know, I know, but the stock market has gone up so much in the last year. It has gone up because of all of the artificial government stimulus and extend and pretend economics. Not to mention the massive influx of cash into the banking system which is being hoarded by the banks and not being lent out, only for them to go invest it in the stock market for the short term. Why do they care, it’s not their money anyway, it’s the taxpayers money. Also, there are millions of people not paying their mortgage payments which is also adding to the amount of money people have available to spend. What did you think they were saving it?