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The Basic Idea of Real Estate Investing

Jun 4, 2008
The whole idea of real estate investing is we are banking on the fact that the property is going to appreciate in value over a period of time. Historically, real estate does tend to appreciate in value, despite occasional periods of turmoil like what we are experiencing right now. Financial advisor, Eric Schurenberg told CNN that although real estate investing tends to return a moderate rate of return for the investor, it is not as risky as stock investing. Real estate can fluctuate from year to year, but stocks can take a nosedive of 100% overnight and never come back.

Unlike stocks, real estate is a tangible investment. You can actually look at a piece of property and say that you own it. You can either live in the property and enjoy it or you can rent it to other people who need a home in which to stay. You can insure the property against a loss such as a fire and are pretty much guaranteed that it is going to be there.

To invest in real estate, you need to have a concept of the market in which you are investing. You also need to know where you should invest in a home. You have probably heard the old lines, "location, location, location," when it comes to the three most important aspects of real estate. Nothing is truer. Real estate is all about location.

You may be tempted to purchase a piece of property in a blighted area because it is cheap and the cost of the property vs. the amount of rent you expect to receive is very favorable. For the most part, this is a temptation you want to avoid. Stick with areas that you feel safe visiting on a regular basis, especially at night. Blighted areas are high crime areas and sooner or later some local "entrepreneur" is going to steal your air conditioner, refrigerator or anything else they can get their hands on. Stick to areas that are lower middle class and you'll always be able to find good tenants and will have fewer landlord headaches.

Investing in real estate can provide you with a safe, stable and consistent rate of return in addition to lots of other benefits including depreciation, or paper losses, appreciation, and a buildup of equity as you pay down the principal. Stick to investing in good solid areas and look for real bargains, especially easy in today's market, and you'll be on the road to a brighter future in no time.
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