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Investing in real estate

Interested in investing in real estate? Dreaming of becoming a real estate tycoon? Want to build your own real estate empire? Will you become a follower of D. Trump?

© 2019 VISOS TEISĖS SAUGOMOS

What is it?

Real estate is defined as land or part of land and all objects associated with it (eg buildings). Real estate is often equated with private property. Rights to it can be acquired in two ways – by purchase or lease. If you are renting real estate, then the ownership of it is temporarily transferred to you.

Investing in real estate is the acquisition, management, rental or sale of real estate for the purpose of making a profit. As you can see, buying your own home is not considered an investment in real estate because it is used for personal purposes and not for profit.

As an investor, you should be more interested in buying real estate than renting. By owning real estate, you will be able to rent it out to tenants who will not only pay the interest to the bank, but will also pay you. Investors are also interested in real estate development – to buy a plot, build buildings, then rent or sell them. This is D. Tramp’s way of investing.

Investments in real estate are classified as alternative investments due to their specifics. Experienced investors view real estate as a reliable, profitable and risk-reducing investment, so real estate is an important part of the investment portfolio.

Advantages

Like any real estate investment, it has its advantages and disadvantages. Real estate is an alternative investment that should be used to diversify your investment portfolio: real estate is less sensitive to market news than equities. Investors value real estate for its diversification, risk management capabilities and resistance to inflation.

Real estate is not securities – it is another class of assets, so real estate will help to diversify the investment portfolio. The value of real estate has little to do with changes in the value of stocks or bonds, so having real estate in your investment portfolio will maintain a more steady growth in the value of the portfolio.

Real estate will strengthen the investment portfolio, as the risk of real estate is generally lower than that of traditional investment instruments and the return on investment is not inferior to them.

Inflation does not reduce the value of real estate. On the one hand, growth in the value of real estate itself is included in inflation. When inflation rises, the value of real estate also rises automatically, so at the end of the lease period, you can enter into a new contract with the tenant based on the changed level of inflation.

What sets real estate apart from other investment instruments is that it is a tangible asset. So even if the price of the property goes down, you will still have what you bought.

You are a real estate developer, so you can make real estate more profitable. You can repair it, install it so that it becomes more attractive to the tenant. In other words, your actions can affect the value of the property. You do not have this opportunity when investing in securities.

Perhaps the most important property feature that attracts investors is leverage. In other words, when you buy real estate, you only contribute part of the equity, and the other part is reimbursed by the bank. It’s also cool that real estate is considered a low-risk asset, so interest on real estate is extremely low, so you get a particularly good loan that multiplies your return on investment.

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