Investing Considerations

The process of real estate investment has evolved into one of the most lucrative investment markets in this country. Year after year, people are consistently making more money on real estate than most other areas of investment. Why is it that real estate is showing a higher ROI than other areas?

Perhaps the main reason that this is true is the fact that homes generally do not depreciate. Think about it, when you bought your first home, what did you pay for it? If you sold it now, what would you ask for it? The evidence is right there. The accumulation of equity is almost fine tuned to additional real estate purchases. Once you have the equity from one home, it can be utilized to purchase another, and so on. This is really no secret, but it pays to remember this and plan ahead.

The biggest decision you have to make at this point is whether you are going to flip the home or rent it long term. There are bonuses to both. In flipping homes the general practice is to buy the home at as low a price as possible, renovate or update the home then sell for a profit. If you know how to interpret the local real estate market there can be some real money in this strategy. The downfall comes when the home does not sell quickly, and it languishes on the market not making any money. This is the advantage to renting for the long term. In renting the home you can use the monthly rent to pay off the financing you received to purchase the home. Plus, the equity from the rental property can again be utilized. The risks you take must be calculated in order for this process to bear fruit. But being risky can pay off in the end.

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