Understanding Real Estate Investing
Real estate is property comprised of the buildings and land on it, and its accompanying natural resources including water, plants or minerals; immovable personal property of that nature. There are various types of real estates as well as sub-types. Real estate investing refers to acquiring real estate for investment purposes, either as a passive investment vehicle or through renting it out. There are also strategies that involve using real estate for business purposes, such as renting office space to a business owner.
In the United States, real estate markets include housing, commercial property, foreclosure, investment properties, single-family homes, vacant land, farm lands, ranching and land speculation, family dwellings, mobile homes, manufactured homes and land trusts. The housing starts market refers to the process of obtaining mortgage financing to construct residential properties. Commercial real estate consists of office buildings, retail stores, warehouses, shopping centers, industrial facilities, office parks, shopping centers and other structures used for business. Foreclosure real estate occurs when a homeowner who cannot keep up with payments to a lender who has foreclosed on the property sells it to a investor who purchases it at a reduced price. An investment property is any property for which the return on the investment is less than the cost of purchase.
Vacant land includes undeveloped land or vacant land waiting to be developed. It can be developed into residential, industrial, or retail properties. Most real estate investors acquire vacant land through borrowing. The purchase of these types of properties usually involves paying down the balance of the loan or securing a mortgage. Acquiring such property for investment purposes requires finding an experienced real estate investor.
There are various strategies used by investors to buy real estate investments. One way is through’re-mortgage banking,’ wherein investors obtain mortgages from banks in return for using existing funds. This arrangement provides investors with a lower interest rate and longer repayment terms. Another strategy is through’mortgage banking’ wherein investors use their own funds as collateral to secure mortgages on real estate. This arrangement usually involves higher interest rates, shorter repayment terms, and shorter periods of purchase.
Real estate investors also buy and sell tax liens. Tax liens are encumbrances on real estate held for payment of taxes. Most states require the owner of a tax lien to pay taxes before releasing the lien to a buyer. Investors usually purchase tax liens for a much lower price than the actual value of the property. Investors also deal with’stacking’ strategies, wherein they invest in tax liens and wait to see whether the taxes are lowered prior to selling the properties.
There are four main categories of real property that an investor can invest in. These include single-family houses, condominiums, industrial real estate, and rental properties. Apart from these four main categories, there exists a lot of opportunity for investors to get into other types of real estate investment. Whether you want to purchase real estate for residential or commercial purposes, it is important for you to identify the appropriate type of real estate investment.