These are the basic things you need to follow if your goal is to be successful in real estate investing.
Recognize the basics
Real estate investing is the acquisition, holding, and sale of rights in real properties with the expectation that cash inflows will be used for future cash outflows, thereby generating favorable rates of return.
Real estate investments are more advantageous than stock investments, which usually require higher investor equity. Real estate investment can be leveraged to increase your return and make a larger investment than you would otherwise. You can also use the money of others to pay off your loan if you rent a property.
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Real estate investing offers other benefits than leverage. Investors can earn after-tax cash flows each year, equity growth through appreciation, and cash flow after taxes upon sale.
Understanding the Elements of Return
Real estate cannot be bought, held, or sold on emotions. It is about the return on your investment. These four elements are the foundation of determining whether an investment in income property is worth buying, keeping, or selling.
1. Cash Flow is the amount of money that a property receives from rents, other income, and less what it pays for operating expenses (loan repayment) is what determines its cash flow.
2. Appreciation is simply the property's value that has increased over time. It can also be described as its future selling price less its original purchase price. Real estate investors purchase the income stream from investment properties to appreciate.
3. Loan Amortization is a process that reduces the loan amount over time, resulting in increased equity. Lenders evaluate rental properties based on their income stream.