Real Estate Introduction

Real Estate is real property, and it differs from personal property. Real Estate also includes the water, trees, minerals, buildings, fences, etc. all included in that land. There are basically 4 different categories of real estate: residential, commercial, raw land, and industrial. 


Types of Real Estate
  • Residential- Any property for residential purposes. For example, family homes, apartments, etc.
  •  Commercial- Any property exclusively for business purposes. For example hospitals, departmental stores, gas stations, malls, restaurants, etc.
  • Raw Land- Includes vacant land or raw agricultural land.
  • Industrial- Any property used for manufacturing, production, storage warehouses, etc. 
The benefit of Real Estate Investment

The benefits of investing in real estate are many. How much money invested depends on the owner's risk-taking tolerance, but it is usually a high investment, the high return type of investment. If you buy any physical property, you can make money by 2 different methods: revenue from rent and leases or by selling the property after a considerate price appreciation. 
A few straight-up benefits are receiving a steady income, a lot of capital appreciation over time, diversification of the portfolio, and leverage earned. 

The risk to Real Estate Investment

Real estate offers a lot of upfront capital and debt if the money borrowed from the bank. The first risk everyone has to afford is the time, unlike the stock market, it takes a few years for the value of the property to appreciate a decent value. 
The real estate market is completely depended on the economic conditions of the country. During economic downturns, it is obviously difficult to find tenants for rental services, and all the industrial property depends on how well the service it is doing. 
With rental properties, a lot of investment is required excluding the value of property like the cost of repairs or refurbishing, the overall scrap and paint every time a new tenant moves in, paying the maintenance and mortgage payment to the bank. There can also be the cost of the property manager if hired by the property owner. 

Different ways to invest in Real Estate

Rental Properties
This is the most common form of investment, followed by many people. Here you have to play the role of a landlord and you are responsible for the mortgage, property taxes, maintenance, finding tenants, and insurance. One way to make money is by rent, rent depends on the property and location and is a safe way to make some extra money, while the other way is to sell the property after holding it for a few years and gain the appreciated value.

Flipping houses
Flippers buy the property for a short period, put in their money to renovate the place, and sell it for a much higher price. The 2 main approaches here are to make the repairs and sell it in a few month's time. There is a 70% rule here that the maximum price you consider paying for a property, pay no more than 70% of the after repair value minus the repair costs. 
While flipping you run the risk, that you won't be able to unload the property at a price that will turn into a profit. Flipping is a perilous investment, but if done right it proves to be lucrative. 

Real Estate Investment groups
These are like mutual fund investments for rental properties. These groups are for people who are landlords but don't want to go through all the hassle to be one. 
The idea here is that a company will buy or build a set of buildings and allow investors to buy them through the company. The company takes care of the maintenance, advertising, and everything for you and just takes a percentage cut from the monthly rent. On paper, this looks like a very healthy investment because you practically don't have to do any work, but they charge high fees.

These are some of the most common real estate investment methods available and can be applied by people all around the world. 

How to avoid the hefty taxes legally

There are millions of real estate deals going on and whenever you sell a piece of property, you have to pay hefty taxes. The best way possible to avoid this is to not touch the money, rather put the money into another trade or exchange a viable trade. Basically, trade-in or buy another piece of property to avoid taxes. The moment you make some money put it into another real estate deal. The keynote here is that you are basically just deferring the taxes to a certain future. The biggest advantage here is that the money works for you then, let's say, for example, you put in about Rs. 1 crore in a property as an initial investment, after a few years you sell that property for Rs 1.5 crore, now put this money into another property and keep doing this until a certain future and then pay taxes once. This way you save a lot of money from taxes and the money keeps growing.
The only disadvantage here is that you won't be able to touch the money, but you will be worth so much in real estate and this is the best way to live in the fast-moving world of real estate. 

Conclusion

There are a lot of strategies for making money in real estate, and you can obviously make a profit if you buy a property hold it for a few years, and sell it at its highest appreciated price. In the end, it all boils down to understanding your investment, risks, and if the overall process is worth the pain or not. 

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