Real estate is one of the most reliable targets for investment. Moreover, when you purchase real estate there are many ways to earn on it. To compare if you buy company share you can get or net get dividends if company fails, if you buy government bonds you only can get a fixed income and nothing more while when buying a building you have much more options. Moreover, this kind of investment is good for beginners.
So how can you earn on real estate investment?
This is easy. If you have purchased a building you can gather rental income from the one who uses it. No matter if the building is commercial or designed for a living – it allows you to get income monthly on the basis of market price of the building.
The good thing about rental income is that it definitely grows and the better is situation in economy the faster is the price of the building growing. And you can set up the price on your own. There is no chance you will get income more than stated from the beginning from bonds which makes it better for investment if you want to control your income per dollar invested.
Of course there are risks and issues to be solved. First of all, building should be used on stated premises. Commercial building cannot be used as a residential building and vice verse. There is always a risk that the one who rents your building will spoil it or damage it or even gets late with paying a rent. However, that doesn’t you cannot take measures against it and one you find a reliable renter you can be sure you will get checks on time on a constant basis.
Selling an Asset
Once the building is sold it becomes an asset. And the good news is the fact you surely can rely on the fact that real estate price is generally growing. You can sell the building you bought 5 years ago for a higher price a the real estate appreciation is higher.
Usually the growth of price significantly overwhelms inflation so selling building definitely brings benefits. However, the thing you should consider – whether it is a good decision to sell an asset. Yes, you will get money, but do you have a better investment option upon the building is saved? Well, if you need money for a living it can be a good idea to sell a building, but for other occasions make sure you have better options for investment.
Better Credit Score
When you have a real estate owned it definitely improves your credit score. That means you can borrow money for a lower interest rate which is a big advantage. You can borrow more and pay less if you want to make another investment if you already have a real estate. If the money price is decreased for you it allows you to choose among other long-term investment option.
Use Your Building
Once you come up with an idea of business having a real estate property can bring you a big advantage. As you know there are some issues renters are facing:
- decrease of income due to rental payments;
- a risk of rent is going to be increased.
Well, when you are an owner of the building you are free of these risks. That doesn’t mean you do not have to consider rent in your balance – you just pay it to yourself. For example, if your have set up rental payment for your building making $ 2000 and now you are using it for business you have to treat these $2000 like a cost when you calculate profit.
Such an approach allows you to see clearly whether your business is worth doing as it can be that it is better to earn on rental of the building and rent another building for your business.
Find a Good Deal
It can be hard to find a good building to buy. Depending on the premises of building there are different factors to consider. For example, if you are going to buy a building which is used for trading or retail – location is the most important factor to consider.
It is better to pay more than a market price for a building with good location (in this term good location means that it is inside the huge traffic) then buying a cheap building with bad location.
Or if you it is a building for warehouse or production you need to make sure it is energy effective and the necessary infrastructure is provided as this is what renters are looking for.
Do Not Be Greedy
The market value of your building depends on numerous factors and the one you can affect is whether it remains functional and modern. You will have to make sure you have enough funds to provide all necessary repairments for the building.
For example, if you do not pay for repairs and maintenance of building’s general appearance (both interior and exterior) its market price will fall and renters won’t agree to pay much for your building.
Of course, building maintenance can affect significantly your passive income and you amy assume it is not as good investment as stated. But you need to consider that these costs are inevitable if you want to keep earning on building as the competition is high and there are many other buildings renters can choose from.
However, that doesn’t mean you need to waste money on explicit works and high-tech design. Make sure you consider needs of your customers (renters). If this building is used as a warehouse it doesn’t need a splendid interior – no one agrees to pay for it – it just need to look good enough for a warehouse.