The word “investment” seems to be used very generously these days. Everybody wants a piece of it and everybody considers “investing” in something that they can make use of or make a profit from.
What is a profitable investment?
Suppose you buy a piece of furniture today for your home and you decide to sell it three years down the line. It is still in good condition and all you want to do is replace it with something new. Now this piece of furniture is, after all, an investment because it has been of good use to you since its purchase. However, when you decide to sell it, you will not gain a higher price from its sale than what you purchased it for and you make no profit from your sale.
When it comes to Real Estate, this commodity is considered as a very good investment because:
- You can make good use of it while it is yours by living in it.
- You can put it up for rent at a profitable price
- You can sell it to a perspective customer when the real estate market is experiencing favorable conditions.
Real Estate always sells for a higher price than the price of purchase, unless the property is badly dilapidated. If it is not in the best condition, you can always renovate it before you put it up for rent or sale so that you make a profit from your investment.
In most cases, real estate sales and leases are under the control of the property owner. Hence, real estate investment is considered as one of the best investments and a profitable one.
Real Estate Investing
The favorable aspect about real estate investing is that there are not many ways in which you can put your hand at it. There are just three sure shot ways to make a profit in this field.
It is true that there are a limited number of ways at your disposal, but this works in your favor because you can focus entirely on any of these three or all of the three and there is still a guarantee that you will make a profit.
The Three Ways to Make a Profit from Real Estate Investment
Primarily, there are three choices that you can opt for when it comes to investing in real estate to make a profit.
1. Making a profit by selling the property after an increase in its value
2. Making a profit by renting out the property and using the rental Income as a second income
3. Making a profit by using the property as a source of business operations
1. Making a profit by selling the property after an increase in its value
Real Estate Investment cannot promise you a staggering profit, but its value certainly does not depreciate. Thus, some amount of profit is inevitable. However, again this is dependent on what property you invest in.
Let’s say you buy a piece of land when its price is relatively low and build a magnificent home on this piece of land with a lovely front and back yard, fenced to perfection. This brand new home can sell for a sky rocketing amount and give you a considerable profit even after you subtract the costs you incurred while having it built.
Now let’s say you buy a home that is already well developed for a particular amount and you decide to sell it a few years down the line. You study the market value of the property and when you find that its selling price exceeds the cost price, you sell it and thus you have made yourself a marginal profit.
Either way, you have made a profit.
2. Making a profit by renting out the property and using the rental Income as a second income
Renting out a property can give you a fixed amount of monthly income from your investment. You can use this amount as a second income and thus benefit from it.
It is a relatively simple method of investment wherein you allow your client to use your property for a specific time duration and this client pays you rent for it. You can use a part of this amount for the upkeep of the rented property and the rest of it is your profit.
3. Making a profit by using the property as a source of business operations
And finally, you can use your property and convert it into a hotel, a parking lot, a couple of stores that you can rent out and make money by using your investment in such business operations. This is one method in which you can ensure that a particular amount of money keeps coming in from this investment.
Although this is a less preferred choice of real estate investing because of the higher value of input, the outputs from this investment are quite high.
Real Estate Investing is good news at the end of the day. All you need is careful judgment of the market, its fluctuations and your timing for purchase and sale needs to be right. With these aspects in control, you will have cracked the world of Real Estate Investing.
