Real estate investing

From Citizendium
Jump to: navigation, search
This article is developing and not approved.
Main Article
Discussion
Related Articles  [?]
Bibliography  [?]
External Links  [?]
Citable Version  [?]
 
This editable Main Article is under development and subject to a disclaimer.

Real estate investing, sometimes abbreviated REI, is the use of real estate as an investment.

There are several ways to invest in real estate. One is through rental properties, both residential and commercial. The investor buys the property, and may profit by collecting rental income above the cost of the mortgage, by building equity in the property as a result of paying of the mortgage, and possibly by appreciation of the property. The advantage of this form of investing is that the investor can often achieve a very high total return on investment compared to the amount of cash invested, a concept called "leverage".

Another way to profit is through rehabbing and then selling properties, a process called "flipping". The investor buys a property that is priced below its market value, or that is in need of repairs. The investor repairs the building, and then sells it for a profit. The advantage of this approach is that an investor with a keen ability to find deals can make large amounts of cash. Taxation on capital gains can be a disadvantage, however.