A real estate investment is generally tangible — you buy land or
property that you can actually see. Think about how stocks and bonds
work. You invest your money in a company you do not physically own. By
buying shares, you are in essence lending the company your money and
hoping for a profit. With real estate, you own the “company,” so you
need to sell “shares” of it to see a profit — by selling or renting the
property.
The details of real estate investment can be overwhelming. There's a
whole new language to learn: closing costs, resale value, liquidity, and
inspections. But if you're willing to overcome your apprehensions,
you'll find that real estate can be a wise investment. If you are
considering investing in real estate, it's important that you do your
research so that your investment will turn into a profitable venture.
It's harder to get out of real estate than a stock or bond purchase, so
educate yourself and make sure you understand exactly what you're doing.
You must consider inflation when investing in real estate. Believe it or
not, a real estate investor can reap profits from inflation alone.
Check out this example. An investor has $30,000 worth of equity in a
$100,000 property. With a 3 percent inflationary increase in property
values, her holdings are now worth $103,000 — a $3,000 increase. That
$3,000 increase on her $30,000 investment translates into a 10 percent
return — due solely to inflation.
