Rental properties - small apartments and single-family homes that you rent
out - are good investments because there is always a shortage of housing, and
there are always people who can afford to rent but cannot afford to buy a home.
Because of the high price of home ownership, and the fact that is generally
undertaken with borrowed funds, there will always be renters, those who are
afraid of the financial obligation or unwilling to leverage themselves into
ownership.
The main advantage that real estate offers is leverage. Using a small amount
of money - or even no money, in a few cases - you can buy real estate worth tens
or hundreds of thousands of dollar. The critical point is learn the basics of
using leverage: how to find the deals that allow you to invest little or none of
your own money and yet reap tremendous rewards.
The second advantage is the price appreciation that occurs in real estate,
whether is the through inflation or fixing up, or just the fact that buyers and
sellers are working in an imperfect market, usually with only a hazy
knowledge as to the real value of property. This is even truer in absorption
markets where he job growth is filling every single vacant rental property. The
house that you bought yesterday for $60,000 may be worth $65,000 to another
person. Find that person, and you've made $5,000.
Price is also boosted by the simple law of supply and demand. The supply of
housing is growing slowly, and the population is mushrooming, through both the
constant flow of immigrants looking for the promised land and our reliance
on the old-fashioned way of enlarging our own families. As long ads demand for
housing continues to outrun supply (and do you see it doing anything else?),
price will keep going up.
Other factors that affect the price of real estate are the general economic
condition of the community, the condition of the surrounding neighborhood, the
actual condition of the property, the terms (this includes the available
financing, the time period involved, owner financing, down payment, and other
factors), the legal rights inherent in the transfer of the property, and its
perceived future value.
