Understanding Real Estate Investments: a Short Guide

In an unstable economy, citizens are increasingly thinking about how to protect their savings from the effects of inflation, so the popularity of investments is growing every year. But the lack of knowledge and experience in this area often leads to losses. To reduce the risk of losing capital, beginners should familiarize themselves with the nuances of investing and figure out where it is better to start their business.

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Real estate investment: what is it?

Investment is the use of temporarily free funds in such a way that they make a profit.

Real estate investing refers to the purchase of property as an investment?to generate income rather than using it as a primary residence. In simple terms, it can be understood as any land, building, infrastructure and other tangible property which is usually immovable but transferable.

In other words, real estate investment is the investment of funds in the purchase of residential or non-residential properties. It is assumed that as a result of such a purchase, the investor will increase his income or at least multiply the amount spent. Investment real estate is real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence.

At the same time, the purchased object must have high liquidity (the ability to quickly convert in monetary terms, in other words, it is the ability to quickly and expensively sell the object).

Classification of Real Estate

Any activity in the real estate market is based on classification. The classification of real estate objects is a type of ordering of information about real estate, which allows arrangement according to one or another feature. To understand what kind of real estate people usually invest in, let's define its classification.

·??????Residential Real Estate: Real estate includes both new buildings and secondary homes. The most common category are single-family houses. There are also condominiums, co-ops, townhouses, duplexes, three-story houses, four-story apartments, luxury mansions and vacation homes.

·??????Industrial Real Estate: these are factory premises, facilities and plots, warehouses, buildings and structures for industrial purposes, etc. which are intended to extract profit by renting out or conducting business activities directly by the owner.

·??????Commercial Real Estate: refers to any real estate where people cannot live on a permanent basis, but are used for doing business and making money. The properties or office buildings such as a complex, are parted into multiple small units. The most obvious examples are cafes, restaurants, offices, shops, hotels, etc.

·??????Retail Space: it is a concept that anyone who runs a business in retail sales has to deal with. This is an area of the trading floor, is that part of the territory of the store (pavilion or open trading floor) that is occupied by the display of goods, customer service and cash settlements with them, cash desks and cash registers, as well as places for the work of service personnel and space for the passage of buyers. These properties are used as showrooms, restaurants, shopping malls, retail stores, etc.

·??????Land: surface of the earth with clear boundaries, with the functional purpose: agricultural, farming t industrial.

·??????Fix and Flip Properties: means residential properties which are in a poorly maintained state and are available at a low price are termed as the fix and flip properties.?This is an investment strategy in which a troubled apartment is bought, renovated and sold at a much higher price.

·??????Mixed-Use: can actually be a combination of diffrent types of property. Retail/restaurant properties with offices or residences are the most common type of mixed-use property, especially in cities.

Consider a typical high-rise building in the city center; most likely a mixed-use asset. Mixed use properties are typically a combination of office, residential/apartment, retail and/or industrial properties. Such investments ensure diversification and minimize the risk of project failure, is termed under mixed-use real estate.

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Best ways to invest in real estate

There are many ways to invest in real estate: for example, you can buy apartments and warehouses on your own in order to rent them out. Or trying to buy real estate cheap and then sell it for more. However, this will require a lot of money, time and effort. In addition, finding profitable properties can be difficult without special knowledge in this area. To avoid such difficulties, there are special option for investing in real estate, available to everyone.

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1. Buy REITs (real estate investment trusts)

REIT (real estate investment trust) is a company that owns real estate and receives income from it. Such funds are invested in various types of real estate - from offices and apartments to hospitals and data centers. They can also buy mortgage-backed securities from banks. The fund distributes the received income among the shareholders, paying them dividends.

REITs invest in a wide range of property types, including offices, apartment buildings, warehouses, malls, healthcare facilities, data centers, cell towers, infrastructure, and hotels. Most REITs focus on a particular type of property, but some have more than one type of property in their portfolio, thereby reducing risk.

Historically, REITs have delivered competitive total returns based on high, stable dividend income and long-term capital growth. The relatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns.

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2. Use an online real estate investing platform

An online real estate platform can help you get into real estate for big business deals without having to spend hundreds of thousands or even millions on a deal. These platforms help developers connect with investors looking to invest in real estate and benefit from what can be very attractive income potential.

The big advantage for investors here is the opportunity to get a share of a lucrative deal that they otherwise would not be able to access. Investors can take part in debt or equity investments, depending on the specific terms of the deal. These investments can earn cash and can offer non-economy returns, giving investors the opportunity to diversify their portfolio's exposure to marketable assets.

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3. Investing in rental properties

Investing in rental property not only makes you a landlord, but also allows you to earn money by collecting rental property. The rental price will depend on the location of the property being rented.

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4. Consider resale investment property

What is flipping in real estate? This is a procedure for buying and further reselling an apartment. First, it is purchased in a state of disrepair, turned into candy and sold for a large amount. There is a lot of work behind the word flipping:

·??????studying ads;

·??????choice of apartment;

·??????purchase. If the apartment is mortgaged, then you have to make a loan;

·??????selection of a team of workers;

·??????purchase of building materials;

·??????repair control;

·??????professional photos of housing;

·??????search for a buyer;

·??????make a deal.

Some realtors devote all their free time to flipping. In order for the business to be successful, it is necessary to analyze the prospects for the value of real estate not only in the market, but in a particular residential area.

You will also need to have a reserve of funds, since it is not enough to buy real estate, you need to give it a marketable appearance, and also spend money on promoting your idea. It is easier for realtors to engage in flipping: they have the knowledge and contacts of repair teams, appraisers and lawyers.

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5. Rent out a room

To make money from real estate, you can rent out part of your home through sites like Airbnb. It's like house hacking for those who are afraid of commitment: you don't have to sign a long-term tenant contract, potential tenants are vetted by Airbnb to some extent, and the company's rules provide damage protection. It is an online platform for private residences around the world. Renting a room, apartment or even a whole house can be more profitable and comfortable than staying in a hotel. To date, airbnb has over 6 million listings in 191 countries.

Renting out a room looks much more affordable than the concept of investing in real estate. If you have a spare room, you can rent it.

As is usually the case, the best real estate investments are the ones that work best for you, the investor. Think about how much free time you have, how much capital you're willing to invest, and whether you're willing to deal with the household problems that will come up regularly.

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Conclusion

Many people know that there is always a demand for real estate, and prices for it are always rising. Someone takes an apartment on a mortgage and settles tenants in it, someone resells it, and for someone real estate is a business. Now the purchase of real estate is the most popular way to increase and preserve capital.

Investing is one of the best ways to earn passive income, even for investors with minimal initial capital. By adhering to the recommendations and gaining experience, you can achieve success in this field of activity and not only save capital, but also significantly increase it.

There is another variant of real estate speculation. Statistics show that prices for new buildings are growing at the initial stage and before the commissioning of the object. It may turn out that prices rose, and then returned to their original levels. In order not to lose money, experts advise to watch the moment when prices continue to rise for several months. At this stage, you need to resell the apartment and invest in another, more profitable project.