By Kevin Chiu
Real estate has long been the preferred method of safe investing for reliable returns on investors’ money backed by a tangible asset. Not all real estate investing is low risk or will automatically yield high returns as many investors learned during the real estate bubble. But making money in real estate has been easier for many investors than other asset classes.
“You had to practically be blind, deaf and dumb not to make a profit in the last bubble,” said financial analyst Lou Gibbs, a Los Angeles investment advisor who steered many away from investing in real estate more than a year before the bubble burst in Southern California.
However, real estate still represents one of the stronger asset classes for investors. Depending upon where you purchase property, land is limited. This creates scarcity in terms of the number of residential properties that may be built. Such scarcity is what contributes to potential increases in the initial purchase price. There are many ways that wealth can be generated through investing in real estate.
While appreciation does remain a viable means of earning a return on an investment over the long haul, there are other more immediate means of generating revenue. Rental income is the most common. By renting out a home or other residential property, rental income could cover a large portion of the purchase price of the property over time. In fact, the rental income could even eventually cover the entire cost of the purchase and then generate profits if it’s purchased at a low enough price.
In some instances, you may even be able to purchase real estate at a price below what it is worth. This can be attained through purchasing homes that are in foreclosure. Foreclosure, contrary to what many may assume, can be considered costly to the lending institution. As such, the lender may be willing to sell off foreclosed property as a means of simply getting it off the books.
A more expansive form of this acquisition strategy would be wholesaling. This would entail purchasing several properties from a mortgage company and then quickly selling them for a slight profit. This is not an easy venture to get involved with since a lot of capital is involved.
Renovating and flipping homes is another common method of boosting the profit potential investing in real estate to make money more quickly. Flipping entails purchasing dilapidated or property in need of reapirs, renovating them to increase the value, and selling at a higher price.