When it comes to investing in the real estate sector, investors are often facing a dilemma, to invest in stocks or investment trusts or REITs, as they are called. Those willing to risk, for potentially higher rewards will opt for stocks. Others, more risk aversive, will choose the second option, which will provide them with a steady dividend flow. In both cases, investors don’t own in physical sense a piece of property but rather ownership or portion of ownership in companies developing buildings or houses. In the case of stocks there is more space for investor’s individual decision making, while in the other it usually relies on brokers’ choices.
Another sometimes highly lucrative investment strategy in this sector is so-called flipping. It refers to buying a house, repairing and then selling it for a higher price. Usually there is a 70% rule, meaning that the future owner will not agree to pay more than 70% of the house’s value when its repair costs are subtracted from its sale price. However, these are usually houses sold at an auction or that have been repossessed by banks after mortgage failure.
When acquiring a loan for these investments, in the US, investors should be familiar with types of these loans and these are: bank loans, hard money loans, private money loans and home equity loans. Investments in real estate are taxed differently and offer their investors benefits. Besides appreciation in price and eventual sale of the property, investors can have a significant income from renting the property.