Is Real Estate Investing For You? Alabama

You might have heard that you can’t go wrong investing in real estate. Unfortunately, that’s not really the case. The real estate market is complicated and volatile. But someone who does their research and invests carefully may be able to boost their income or even make a living as a real estate investor.

There are a number of ways to invest in real estate. Here are a few questions you might ask yourself to help determine what type of real estate investing might work best for you:

• Are you looking for regular, ongoing income?
• Are you willing to wait for the payoff on your investment?
• Do you want to be directly involved in buying, selling, maintaining and managing properties?
• Would you feel better letting others decide what real estate investments to make?

If you’re looking for regular income, you might consider investing in single-family and multifamily residential rental properties. You can manage them yourself or hire property managers to handle things like upkeep, maintenance and rent collection.

To set rents, you’ll need a good understanding of the area rental market and what you can reasonably expect to charge. You’ll also need to calculate your expenses, including mortgage payments, taxes, utilities, maintenance, insurance, legal and management services, and have contingencies in place for vacancies.

Commercial properties can also provide ongoing income from leases. Commercial properties include retail stores, restaurants, entertainment venues and all types of office buildings. Some people form partnerships with other investors when buying or investing in commercial properties to pool resources and spread out risk.

Others real estate investments include non-income-producing properties. The easiest example is your home. It could be considered an investment because you hope to sell it at a profit one day, and because you can borrow against the equity in the meantime.

Another example would be a property you buy with the intention of quickly selling at a profit, often known as “flipping.” Some investors buy fixer-uppers they believe are undervalued for the market, then either sell them right away to try to make a small profit or invest money to improve them and sell later for what they hope to be a larger profit.

Another way to flip property is to put a small down payment on a unit in a newly announced condominium project. Prices tend to go up as more units are presold. Investors bank on selling their units for a profit, sometimes without ever moving in. Be aware that developers often try to limit the number of investors or speculators by requiring owners to live in the unit for a few months before selling or renting it.

If you really want to be hands off, you might consider putting money into a real estate investment trust, or REIT. Many of these trusts are publicly traded. There are different types of REITs, according to the Securities and Exchange Commission: Equity, mortgage and hybrid. For more information, go to www.sec.gov/answers/reits.htm.

This is just a very basic summary and not intended to be comprehensive. You have a lot of research to do before you jump in to real estate investing. And remember, no investment is without risk – least of all in the world of real estate.