Investing in Real Estate – Basics

Before investing in real estate, it’s important to have a stable job to ensure financial stability. According to me, the importance of having financial stability by ensuring better productivity at your work place is one of the things seldom talked about, when discussing personal finance. So, your basic need is not how and where to invest, but how to live within your means, and save efficiently.

I have seen many people (some under huge debt) investing in stock market by borrowing money. This is the biggest mistake you can ever make. Don’t invest until you have accumulated enough, or have a side income. You must, however, never borrow money to invest.

Equally big mistake is believing in so-called stock market or real estate ‘guru’s’ opinion. There is no way to predict the short term movement of the market. Hence, make decisions based on your research and knowledge. Or else, you might lose everything you have in lure of owning millions overnight.
After you have accumulated capital

Once you have saved enough and accumulated a huge sum, you have variety of options to invest in, depending on your risk appetite. Let’s discuss the basics of investing in real estate. Owning a piece of land or apartment, and earning money from it is a business. You cannot afford to neglect it once you buy it. If you rent it, managing tenants is a huge pain. They can call you up at 2 am and ask you to fix the toilet seat or broken pipeline. So, before you invest in real estate, remember, you are about to have a second job.

There are, broadly, two types of real estate investors. First, the income-driven investor, who buys a property and rent it out to earn a regular income every month. Second, the trader investor, who buys a property to sell it at a higher price and earn huge profit, and reinvest the amount.

In reality, most people investing in real estate are a mix of these both types. It is, however, good to figure out which category you belong to, so you have a clear goal before your start. By doing this, your desist emotions to take over and wreck your investment.

It is, however, important not to depend on the profits or income earned of it. Though real estate market is not as risky as stock market, current market trends have compelled us to detach from it.
If you wait for the right time to sell off your investment, and if the market crashes further, instead of worrying about your investment, you must have funds to invest further and exploit the opportunity. Investing in real estate is an art.