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Real Estate Investor
Motivations of a Real Estate Investor An investor chooses to invest in real estate due to benefits such as cash flow, appreciation and depreciation:.
- Cash Flow: This type of investors chooses to opt for 5 to 10 percent down payment on the acquired property. This allows them to have lower mortgage payment and favorable financing terms. This ensures a positive cash flow which can be calculated by subtracting the monthly debt from the monthly rent.
- Appreciation: The actual value of the property may increase over time due to some improvement in the property or its surrounding areas. This is called appreciation of the property.
- Depreciation: At times, the government may allow the owners of a property to depreciate its value over its life span despite the actual increase in its value. This allows the investor to claim tax deduction.
Following is a list of some common mistakes which should be avoided:.
- Lack of Planning: This is the most common mistake made by a novice investor. Before actually buying a house or other property, you should have a sound strategy in place. You should first carefully calculate the cash flow over a period of time and only then decide to buy the property.
- Quick Money: Most real estate investors believe that they can make quick money in this field. You should remember that real estate investment is a long term project.
- Doing it Alone: You should avoid the mistake of doing everything yourself from buying the property to leasing or selling it. Take the help of experts of the field such as home inspector, real estate agent, closing attorney and a lender.