Real estate investing is the involvement of management, purchase, rental, sale, or ownership of a real estate that can be used as profit. Real estate development is the improvement of a specific realty property as part of the strategy in the investment of real estate. This is generally considered as a real estate sub-specialty. Relative to the other investment kinds, real estate is a form of asset that has fixed liquidity.
Real estate also is also regarded to be capital intensive and is highly dependent on cash flow. These factors must be well managed and understood otherwise the investor gives himself risks. One of the main causes for investment to fail in dealing with real estate is because the investor experiences a zero cash flow for quite some time wherein the amount can no longer be sustained, this will result to a forced reselling of the property gone into insolvency.
Acquisition and sources
Acquiring and looking for sources of real estate is not hard although the real estate market in numerous countries are not that efficient or organized compared to other having instruments of liquid investment. Individual properties are not interchangeable and are unique by themselves. This presents one big challenge to investors who want to evaluate investments and price opportunities. This is one reason why when searching for properties wherein one can invest in, it involves competition and substantial hard work among the investors to be able to purchase properties.
This will be variable depending on the availability knowledge. This provides a lot of opportunities for the investors to acquire properties at cheaper prices but poses an increased risk in terms of transaction. Investors of real estate usually use a number of appraisal methods in order to figure out the value of the property before the purchase.
Sources of properties for investment include:
• Agents of real estate
• Market listings
• Private sales
• Public auction
The moment a property fit for investment is located, the investor will negotiate a sale price and terms with the one selling the property, then after the business talk, the contract for sale will be executed. In order to be assisted in the process of acquisition, the investors can sometimes employ attorneys or agents having the knowledge about real estate. This is due to the deal that acquire a real estate posses a lot of complexes which may lead to a very costly deal if executed improperly.
During property acquisition, the investor makes an offer to buy the reserve of the investor’s right to complete their transaction upon satisfactorily negotiating with the latter. This reservation money can be refunded or not and is a sign for the investor’s willingness and seriousness to purchase the property.
The terms for the offer in real estate investing include several contingencies that allow the investor sufficient time to complete diligence and acquire financing before the final purchase. During the contingency period, the one investing usually reserve the right to abolish the offer with no attached penalties and accomplish refund on money deposits. Once the contingencies expired, rescinding usually requires the forfeit of money deposits and may sometimes leave penalties as well.
That is why, to avoid such penalties, the investor must have a great deal of understanding and knowledge on the venture that he has to overcome. Legal advises from people having investing backgrounds will greatly help to lessen the risk.