Investment in real estate
Do you wanna say your boss that am not going to do your job anymore? Do you want freedom? Don't you want that you haven't go to work when you're sick? Do you want to be enough financially strong that any monthly bill can't afraid you anymore? Do you want to be your own boss? Ask these questions to yourself you will get the answer.
Now many people think that investment in real estate requires too much capital to start. But it doesn't like that my friend. Today am gonna tell you some ways where you can start from a smaller capital and can be your own boss.
Real estate wholesaling
If you don't have enough capital to own a property and hold it to years to make profit. You can start the real estate wholesaling. Many people often doing it well and you see they become rich in some years. And the big advantage in wholesaling is that you don't need to purchase the property. Now the question which may be comes to your mind that what is real estate wholesaling?
Simply find an interested seller and an interested buyer. Be an intermediate (dealer) between them. Lets say seller want to sell his property at a cost of $ 2lakhs. Now it is depend on you at how much price you can sell it to buyer. Simply the amount above from the $2lakhs will be yours. This strategy of investment in real estate is called real estate wholesaling.
Advantages of real estate wholesaling
- You don't need too much capital to start this buisness because you don't have to buy the property you just have to become an intermediate between the seller and the buyer.
- You don't need any degree to start the buisness the only thing which gonna be matter is that how good you are in dealing with the people, your convincing skills and your communication skills.
- It is a shorterm buisness strategy you don't need to buy a property and hold it to years to make profits.
The only disadvatage of this strategy of investment in real estate is that you cannot earn regular rent as in flipping strategy.
Property flipping
In this investment in real estate strategy, Investors try to buy a property at a lower price and sell it to higher price. This is a very common strategy which is used by many investors in the world. Buy a property hold it for a time until the price and demand of the properties becomes high then sell it to higher price and book your profit.
This strategy requires too much attention and mind also. You have to choose a right area in which the price of the properties are much lower and also choose a property which is cheaper in that area too, repair it by investing some money, hold it until the price rises and book profit by selling it.
Disadvantages of flipping strategy
- You need a high capital to start this buisness.
- There are too many costs which you have too bear after purchasing the property. The first one is legal fees to complete the transactions required while buying the property. After that you will have to pay taxes for that property.
- It needs to much time, first you need to spend your time in finding the right and cheaper property. Then you have to spend your time to renovate the property and then you have to give it time to rise its price. Finally when you decide to sell the property you need to spend your time in contacting the buyers and showing them your property. And if you hire a agent you will have to give him some commission to sell your property.
Renting property
It is the most common strategy of investment in real estate. Many investors like to buy a property fix or prepare it and give it to the rent. This strategy gives you a passive income source. You need to invest only once and get the rent per month. And you can sell it too whenever needed at a much higher price.
The great advantage of this strategy is that you can earn a passive income from this strategy.
Flipping vs renting property
When it comes to flipping vs renting property, there is no question that renting property strategy is better than flipping strategy as it gives you a regular income.
Lets suppose two friend methew and john make investments in real estate. Methew like to earn profit from flipping strategy and john like to earn income by renting properties. Both the friends have bought a property at the same price of $50,000. Methew sold it after two years at a price of $65000 and book his profit of $15000. And john use to repair his property let say at a cost of $5000 then give it to rent $200 per month and after two years he also decided to sold his property. Now calculate the total income of john. Suppose it took 1 month in repairing and he earn the rent of 23 months which is $4600 after two years. Now as he already fixed his house well the buyer is ready to buy the property at a price of $75000. Now,
Profit = (Selling price + total rent) - (buying price+repairing cost)
Profit = ($75,000+$4600) - ( $50,000+$5000)
Profit = $24600
John make $9600 profit more than Methew. So, clearly renting property strategy is far better than flipping property strategy.
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Ways to buy a property
Many people find to too difficult to buy or invest in a property as it requires too much capital. So, here are some ways of buying a property-
1. Debt
You can take a loan from the banks or housing finance campanies. The average home loan interest rate varies from 7-14 % per annum. The minimum down payment you have to give is 20% in India and you can take loan for rest 80% amount on the behalf of your current house. You can give your new house to rent and can pay the EMI from rent and some amount from your salary.
2. Find partners
If you don't want to take a loan by pledging your current house and also you don't have enough capital to own the house but you want to make investment in real estate as you see the potential to grow your money. You can go for collaborations. Find a good parteners, ask your relatives or friends. Tell them about the property you want to buy tell them the potential of that property. If they find the deal good they will definitely collaborate with you to buy that property.
Real estate vs stocks
Advantages over stocks
- Risk, the risk in invesment in real estate is comparitively low as the price of stocks directly derives from the profit and growth of the company. We usually see a company which was doing good, maybe the price of that company stock falls down 90% because of bad management and some other reasons. But the price of properties doesn't fall down enough. That's why we see more losses in stock market than real estate. Ex- yes bank, DHFL, India bulls housing finance. If you are active in stock market then you may know what was happen with these large cap companies. If not comment down we will make a blog also on that cases.
- While investing in real estate you don't need that high knowledge which requires in stock market. In stock market you need to keep focus your eyes on your portfolio. You need to read the balance sheets, fundamentals, technicals on regular basis. You need to be aware of market what is going on in companies.
- Stock market is too volatile as compare to real estate. A stock price can fall too much by just one bad news. Stock market needs a lot patience. That's why we see more losses in stock market than real estate.
- You can earn a regular income by making investment in real estate by give it to rent. But in stock market the only way is dividend which is not compulsary. Not every company gives dividend its totally depend on them if they want to share their profit with the shareholders.
Disadvatanges over stock
- Buying a house requires too much capital as compare to stock market. In stock market you can start from as less money as you have. No need to take loans. No need to pledge your house.
- Liquidity is very high in stocks as compare to real estate. You cannot sell your property easily whenever you need funds. But you can sell stocks easily there is no problem of liquidity.
- On the returns parameter you can make your money even double or triple in a year if you find a good stock, analyse it well. But in real estate it is almost imlossible unless your luck is too good.
Real estate vs. Gold investment
Advantages over gold invesment
- Investment in real estate can give you regular income in the form a rent whereas you can only earn profit in gold by selling it after holding for long time. You won't get any interest for holding it for even lifetime.
- If you make investment in real estate mindfully and with calculative risk you can earn more profit than the returns in gold investment.
Disadvatanges of investment in real estate over gold investment
- Liquidity in gold is far more than in properties. You just can't sell your property immediately whenever you need the funds whereas you can sell the gold easily whenever you needed.
- Investment in real estate takes lots of time. It takes months to decide which property you should buy and in which area and its not finished after even buying the property then, you have to repair it and also at selling time, You need to talk with many buyers to sell it. Whereas you don't need to give your time in gold investment you just need to go to jewellery shop, just buy it and done.
- Investment in real estate requires a lot funds than in gold investment.
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Conclusion
The above comparison investment in real estate vs stocks and investment in real estate vs gold investment has been done on the behalf of facts and observations. Its totally depend on you which investment option you want to do by comparing all the parameters.
Click here to download the free ebook on real estate investing by Preston Ely to know deep things about real estate investment.
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