Investing in real estate has, over the years, become a very common feature in today’s economy which seems to be degrading every day. Buying of a real estate involves more than just owning a home for the party involved. Despite the fact that the real estate market has more gains opportunities compared to other investment plans, the process involved in buying or owning real estate is very complex. Investing in real estate involves the various aspects of ownership including buying and owning the property as well as managing it in terms of renting or selling the real estate for profit purposes. Real estate, just like many investments, forms an asset to the owner although its liquidity is limited compared to most of the other investments (Alcorn 2000). The success of a real estate investment highly depends on the initial capital and cash flow as well. The proper management of the two factors is very critical in investing in real estate; otherwise the venture would turn out to be a very risky one. When this happens, investment failure sets in during which the investor starts working at an unsustainable negative cash flow which eventually leads to incurrence of loss to the investor through resell of the property at low prices and subsequent financial instabilities to the investor. However, the fact about real estate investment remains that the well being of real estate investors entirely depends on the availability and the cost of capital in the market. As long as investors can have reasonable prices for financing their properties, then it will be much easier to maintain any related market (Stanley St. Labs 2011). This paper will, therefore, real estate as a form of investment rather than a home ownership strategy.
Acquisition of real estates
The organization of real estate markets is not as efficient as that of other investments especially the more liquid ones. Since the properties involved in real estate investments are personal, their location may pose a great challenge especially where competition for the same is high. A lot of work may, therefore, be required in locating the properties. However, this factor may as well be beneficial in that investors get the opportunity to obtain such properties at bargainable prizes. The two factors must be weighed before deciding on where to locate a real estate depending on the variability between the two. In addition, real estate investors have to consider several factors before purchasing or acquiring it.
Similarly, there are several sources from which real estate investors can obtain properties form. The common trusted sources of investment properties are public auctions, agents of real estate investments, sales by private parties, listings from the real estate market and wholesalers which may include public agents (Channon 1996). The choice on the source to use depends on the various factors related to the property such price, location, security, just to mention a few. However, the initial stage involved in acquiring a real estate is the location of the property after which the investor and the seller of the property negotiates about the price of the property and other related terms of sale after the investor verifies that the property is in good conditions to be bought. This is then followed by execution of a contract which entails the full terms of sale. Many real estate investors may choose to employ the use of an attorney or a real estate agent because the whole process is very complex and could e very risky if not well executed.
Investing in real estate is quite expensive and this makes it difficult for investors to pay in cash for the purchase of the property. The payment of the purchase is therefore made using other financing services such as mortgages. These loans are easily attainable because of the fact that the property being purchased is itself used as collateral hence the investor seeking the loan need not to have other properties for the loan security purposes. However, such financing services are mostly sought by those investors who require large amounts of equity requirements. Low equity seekers may choose to use other financing plans such as financing services from the real estate seller or form private sources (Beattie 2011). On the other hand, real estate organizations have their own capital sources and all the strategies required to fully purchase property. This is very important in avoiding the risks associated with financing services.
Real estate investment has become a very common venture for many individuals as well as business organizations especially with the increasing economical crisis that require financial stability. However, the process involved in acquiring property and maintaining it is complex and requires adequate finances, failure to which the investor will be faced with drastic losses. Due to the complexity involved, investors who have little knowledge on the field are advised to employ attorneys or real estate agents when purchasing as well as managing the same. Similarly, the high costs of purchasing real estate properties results to many investors seeking financial sources which should also be well planned for and organized to prevent the risks and losses associated with them. All in all investing in real estate is quite profitable when properly managed.
Alcorn, Ray. “Real estate investing in a rising-rate environment”. 2000.
Beattie, Andrew. “Simple ways to invest in real estate”. 2011 .
Channon, Terence. “Invest in real estate”. 1996.
Stanley St. Labs. “Real estate investment. 2011. Web.