For those on the outside, real estate can seem an intricate, even arcane field with strange rules and even stranger conventions. But by virtue of the fact you are reading this article on real estate investing, you already suspect that stock markets offer too little returns for too much risk.
Before the initiation of the industrial revolution, wealth and influence were measured largely in terms of the amount of properties owned by an individual or the family. Even though the advent of the twentieth century saw the rise of the securities market, and the ensuing increase in stock ownership, real estate investing can certainly prove to be a very profitable venture for those looking to diversify their existing portfolio. Real estate investing is the most consistent profitable investment medium in the world. With perseverance and smart investment approach, anyone can make a killing.
Before 1960, only affluent individuals and multinational companies had the monetary resources, essential for major real estate investing ventures such as shopping malls and corporate parks. These days, real estate investment trusts (referred to as REITs) can be an opportune way for the common investor to profit in real estate investing, without bothering to acquire the property.
How to Make Money Investing in Real Estate
When times turn bleak and everyone else is selling, it’s an even better time to get into real estate investing. While most people have heard that real estate investing offers tremendous financial leverage, only some really understand how it works. Leverage essentially means that you buy real estate with OPM (or other people’s money). Of course you put in little of your own, but the fundamental tenet of real estate investing is that the lesser the money you put into the deal, the higher your chances for profit.
This sort of terminology referred as margin trading is prevalent in stock markets. Of course, stocks tend to be far more volatile than real estate investing. Leveraging in real estate works in a similar way, only a whole lot better. One of the key differences between the stocks and real estate investing is volatility. While stock prices can move erratically on daily basis, property prices move glacially.
Even if real estate prices go up by ten percent in a single year, it’s considered a colossal rise. Overall in real estate investing, what tends to happen is that the rate of increase may slow down, but hardly ever turns negative. This has significant ramifications for investors. One of the major is that, because real estate is so steady an investment over time, banks and financial institutions are willing to lend very high loan-to-value financing.