It’s really hard investing these days. Financial institutions are affected by credit crunch. Some of them even announced their bankruptcy in 2008. So where does that leave would-be investors?
In simple terms, a real estate is a property that is immovable. It could be in a form of land, or any structure attached to it like buildings (commercial or residential). This kind of property is characterized by the transfer of the title to the land (as opposed to personal property wherein title can be retained). Real estate investments are not without risks, but a lot of investors actually earn a lot from their properties without selling them.
While the real estate business is also feeling the crisis, it is still one of the safest investments you can have at a time of economic turbulence. Even if stocks plunged or banks closed, your property would still be there. Of course, house and property prices are down at this period. But once the crisis is over, you can be assured that the prices of your properties will go back to its normal prices (or even higher).
One can say that real estate investment is a lucrative business—that is if you think of it as a business opportunity. Property investments can generate rental income. Let’s say your piece of land is strategically located within the metropolis, some investors would be interested to lease (either long-term or short-term) your property for their business. But if you have the money to develop your own property, it would be better. A commercial structure built on your property would also generate rental income through tenants who will lease the commercial property or parts of it. Properties such as these can be used as collateral to secure a loan for a business venture. It can also be used to offset an otherwise taxable income through cash savings on tax deductible interest rates losses.
If the real estate investor chooses not to be aggressive, he or she can still earn through the appreciation of the property value. Through this method, the investor will have capital gains since he or she can sell the property at a higher price. There is a slight difference between real estate investments and residential real estates in terms of tax implications. Investment in real estates is considered as long-term since most of the owners maintain or develop their properties (for rental or sale at a higher price).
Most of the investors form a real estate investment trust or REIT (or join an existing group) to reduce or totally eliminate corporate income taxes. REIT’s may be a corporation or an investment firm that solely put their capital on real estate. The firm is then required to spread 90 percent of their income (which is taxable) among their investors.
As we have said earlier, investments in real estate has its own share of risks. We may never know when the prices of properties will plunge or if we’ll ever get a return of out investment. And because it’s long-term endeavor, profits will not be felt right away. It takes months or even years before you can fully enjoy the fruits of your investment.
Tags: Real Estate, real estate invement, real estate investing