Hello yet again, and welcome to the fourth (and final) installment of Residential and Commercial Real Estate Investing 101! Over the past three articles, we’ve discussed many of the core aspects of real estate investing that you should be familiar with, and it is almost time for you to fly from the nest. But before you embark on the long and prosperous voyage that will one day lead you to ludicrous, Donald-Trump-like wealth (sans the ludicrous, Donald-Trump-like hair) — or failing that, at least financial security — I want to cover a few final things.
Hello again, and welcome to the third installment of Residential and Commercial Real Estate Investing 101. Over the past two articles, we’ve touched upon many of the basics — e.g., the pros and cons of investing in real estate, indirect and direct investment options, the importance of evaluating the appreciation potential and projected cash flow of a property — so that by now you should have a pretty good idea of what real estate investing is all about, as well as the type of property (or properties) that you would like to purchase. However, if you are joining the class for the first time, then rest assured you have nothing to worry about! The articles in this tutorial may be read in any order (or even independently of one another), and I have provided links below for the first and second installments:
Welcome back! In the first part of this tutorial, Residential and Commercial Real Estate Investing 101 (Part 1), I talked about the attractive aspects of owning investment property, citing the historical rate of appreciation enjoyed by real estate market investors — about 9% per year — as well as the added option to earn an additional income through rent. I also laid out some of the cons of investing in real estate, including the enormous responsibility that comes with owning properties directly, especially for those investors who seek to become landlords. Finally, I suggested some simple and profitable alternatives to directly purchasing multiple investment properties — such as owning a home and/or purchasing shares in REITs or REIT mutual funds — for those folks who would rather take advantage of real estate market returns, without assuming as much of the hassle that goes hand-in-hand with direct ownership. (Don’t worry if you missed Part 1 of this tutorial, as it may be accessed via the handy link at the beginning of this paragraph!)
Real estate investment can seem intimidating to the uninitiated. The first and only foray into owning property that most Americans will ever make is in purchasing a home — and that’s challenging enough without adding complications to the mix! After all, who in their right mind would sign-up for more in the way of mortgage payments, insurance fees, and maintenance costs?
As an answer, you need only look at the historic rate of appreciation seen on real estate market investments (about 9% per year over the past thirty-five years).1 This makes sense because jobs are created as the economy grows. Consider that the U.S. population sat at right around five million souls two hundred years ago. A century ago, there were (approximately) seventy-five million people living in our country. Today, that number has more than quadrupled, and over three hundred million people now call the US of A home — and you may safely assume that most of those folks are going to need two things at some point: a place to work and a place to live!2,3 Incidentally, both of those things require real estate.
There are a few important milestones that mark the significant moments in our lives — such as graduating from college, starting a career, or getting married — and buying a first home is high on that list. But before you take the plunge on such a monumental purchase, it is paramount that you find the answers to a number of preliminary questions, or risk being overwhelmed by the ordeal. As you might imagine, unfamiliarity with the home buying process can cause someone to make a series of poor decisions. This, in turn, may lead a person to purchase an unsatisfactory property (that he or she is then shackled with for the foreseeable future).