A Primer on Real Estate Investing

 

   

 

This is a short syllabus originally intended for my children who will have to take hold of my real estate holdings in not so distant a future. In more recent times, however, many of my dearest relatives and friends have also expressed interest prompting me to publish it online for a broader access. 

To reiterate, this is not a comprehensive guide on real estate investing. It is a short synopsis providing a quick understanding of the basic real estate operations and its terminology. Even to that end it contains only the bare bones and I will have to keep expanding it and refining it in the near future. As it is, nevertheless, it's far mare than what I knew when I started my own real estate investments in 1994. I did relatively well though. I cut my day job to part-time in 1996 and retired completely in 1999. I wanted to learn about real estate, but to my chagrin I never found a good and concise source to my satisfaction. Most of the stuff online is either elementary or outright confusing,  I had to pick up the tidbits myself along my own journey. I did it, and I am glad I did it my way.

Like many important things in life you learn it by doing it!  Shining examples include: love, riding bicycles, swimming, and so on. But rest assured; what you have here is more than adequate to give you a quick grasp of the cardinal elements of real estate investing and help you make learned decisions as you step into this arena.

 

What is Real Estate?

The definition of real estate is “land and the improvements associated with it,” be it structures (buildings), crops, or even mineral rights. It is part of the class of investment vehicles known as “real assets,”  – they are a “real asset” in that we can touch and feel them, they tend to be more long-term in nature, and they guard against inflation.

 

 

Why Invest in Real Estate?

Real estate generally provides a steady return to investors. When used as a professionally managed investment fund, in many instances it will under-perform other asset classes. As such it is only used by small investors who lack the requisite credit power to procure large bank loans on their own, or by portfolio managers to balance and diversify their assets.

In the hands of the right individual though it can rapidly transform into a wealth building milieu. Individuals in this category include the likes of. Donald Trump, etc, and typically share the following traits:

  • An established or growing relationship with lending institutions. This is the most important and the highest impediment for average people to overcome. You can get a jump start by partnering with your parents, in-laws, etc, who may have strong credit. Otherwise you are doomed to work your way up in small numbers.

  • A keen eye for picking the right real estate appropriate for their level of risk tolerance.

  • A good business acumen to manage their finances through the ups and downs of the market.

  • A good knowledge of the tax laws governing real estate investing.

In the remaining pages I will address these factors. You can use the navigator at the top of the page to move around.