When you begin investing in the real estate market you might be trying to get your money to work for you, but there might be a few speed bumps to take you off track. If you’re going to make enough money to cover the risk of investing in real estate than you need to have a deep understanding of the basics. Your goal is to make money by avoiding bankruptcy, but many walk into real estate investing understanding that rule, but not everyone walks away unscathed.
If you plan on making money in real estate investing you need to know 4 basic principles.
Real Estate Appreciation
Properties can become more valuable based on changes. Those changes can come in the form of home improvements, property improvements or neighborhood improvements. If a new school or major shopping center goes up nearby it may make your real estate investment more attractive and increase in value.
There is a type of real estate investment which focuses on properties that provide a cash flow stream. Usually this type of investment revolves around buying properties like apartment buildings or buying and renting out duplexes. Collecting money from a cash flow real estate investment can also be from non-traditional properties like storage units and carports.
Ancillary Real Estate Income
There is one source of real estate income many folks don’t think about at all and that’s ancillary real estate income. In short it’s renting out real estate for a small business within a larger businesses. Many larger businesses want vending machines but need someone to help run them. As such these businesses will rent out some real estate for smaller businesses to setup shop. If you own an apartment property you can rent out space for cleaners, laundry facilities, hair stylists and more. Not only does it make your business more attractive to others, you’re also making money off of the small businesses nearby.
Related Income Sources
Now this type of income isn’t necessarily generated by owning real estate but it is related to real estate. This type of income is generated by being a “specialists” in the industry, one who make money through commission. Most real estate transactions require specialists like real estate brokers who get to keep a percentage from all properties sold. So if you can invest in a business that helps other businesses run smoothly you can make a profit. An example would be investing in a up a hotel management business that keeps 10% of all sales because they run the day-to-day operations.
There are also many valuable local resources for both investors and people moving into the area. You’re obviously going to want to look at different property management companies, but you’re also going to need to invest like a home buyer. Many of the same things that people are looking for when they move into an area like crime, and school districts are also some of the best places to invest. These are the homes people want to buy from you. So here is a small list of local resources that may help you make the next step.