What is real estate?
Real estate can be summarized as the property, land that comes with it, and all-natural resources on the land. These natural resources include but to limited to water, livestock, minerals, etc.
When you own a real estate, you have the right to do what you want on it as long as the law permits it.
Types of real estate
The following are the main types of real estate. Learn more in details about real estate.
- Residential
- Commercial
- Industrial
Pros
- It can provide monthly income. For example, you can have a monthly income from your rental property or farmland.
- It can appreciate over time. Appreciation means that your property will increase in value. Keep in mind that properties can also depreciate. In this case, they will lose value depending on the market condition and location.
- They are good for diversification of portfolios.
- You can buy real estate using on leverage
cons
- It is difficult to liquidate them. It takes a long time to convert a tangible asset into cash. This is a drawback in real estate. You cannot rely on them for quick money.
- They require active management and eduction. This applies to big investment complexes or assets. They are hard to manage and sometimes you need proper trading or higher education to take care of them.
- They have a large barrier to entry. It is hard for many small investors to start businesses in real estate. With a high down payment and associated costs per property, it is hard to build a profitable portfolio.
If you want to invest in real estate, start small. Buy a few properties and build your portfolio slow by slow. You will be learning the rules of the game while gathering more money for your next property.
It is also possible to start big. For example, you can partner with an investor to acquire a larger rental property. In this case, you can either manger it or hire an experienced manager.
