Let’s talk about advantages and disadvantages! Real estate investing refers to the buying, holding, and selling of real estate property as a part of an investment plan. Real estate investing basically involves the acquisition, title, and maintenance of real estate property. Some people call it property investing. Property Investing is the buying, holding, and selling of property in one market or region. Other people call it real estate flipping or property flipping.
The properties that an investor buys are either bought from private investors or from other private investors. A private investor is a person who makes an offer for a particular property and waits for someone else to respond with an offer matching the offer. The investor then waits for the appropriate time (occasionally just days) for the asking person to respond and make an offer to buy the property. If the person who was asking for the property cannot find an appropriate buyer, the investor goes out and purchases the property, owns the property, and holds the property until an acceptable offer is made.
The investor then resells the property at a profit to a third party and becomes a licensed real estate investor. At that point the third party purchaser pays the original owner of the purchase price, which is less than the total cost of the property, less any current liens on the property, and the difference in the market value of the property and the purchaser’s purchase price. So if the property was bought six months ago for $400K and the current owner is paying $400K, the real estate investor would be making a six figure monthly income.
One of the advantages to investing in real estate investing is the opportunity to become your own boss. You can work when you want and where you want. You can choose whether you want to work on an hourly basis or a full-time basis. And unlike a typical job, where there are company rules and work requirements, when you invest in an investment property, you have no boss to follow, no one to answer to, and no restrictions.
Another advantage to investing in rental properties is the income potential. As long as you purchase the property at a good price, with a sound structure, and maintain the property, you should be able to make a significant amount of money. The key to earning a substantial income is to find a property that will allow for a nice passive rental rate. Passive income can be significantly greater than the initial investment made if the property has good structural elements, state of the art interior, exterior, and pest-control features.
Finally, real estate investing offers many tax benefits. In most instances, these benefits are in the form of depreciation credits, which allow the investor to depreciate the expense of the investment property over time. This allows investors to increase their net worth at tax time. Also, real estate investing allows you to deduct the costs of purchasing the investment properties, which can significantly reduce your taxable income.