Understanding the Rudiments of Real Estate Investments

Investing in real estate is not an easy task and therefore has some inherent risks. However, when compared with investing in just about anything else, real estate involves relatively low risk for the simple reason that you can control most elements of a real estate investment. For instance, you have full control over where you invest (areas with measurably and consistently higher growth rates than other areas. When to buy, what to buy and through which lenders you get your finance. Similarly, you can control which tenants you lease your property to, whether or not to effect improvements on the property, and when (if ever!) you want to sell. Furthermore, real estate is relatively simple to learn (no three year college course required), easy to practice (you don’t need to be certified in any way as a pre-requisite to investing in real estate), and easy to look after (hire a property manager)

Perhaps most importantly from an investment point of view, it is relatively easy to make large amount of money through investing in real property, a fact made all the more appealing by the reality that you don’t need to have much capital to achieve this. To be sure, there are many people who make obscene amounts of money from such things as stocks (consider Warren Buffet), currencies (George Soros), high-tech (Bill Gates), cars (Henry Ford), fashion (Ralph Lauren) and in a multitude of other endeavors. However, it is our contention that if you take groups of 1,000 people, all chosen at random, and you train one group to invest in stocks, the next in automobiles, the next group to invest in currencies, the next in high-tech, the next in automobiles, the next in fashion and so on, and you also take one group of 1,000 people and train them to invest in real estate, then at the end of ten years, the property investors will on average have greatly outperformed all other investors.

Not only will the average performance of the real estate investors be far higher, but the standard deviation in performance will be much lower, meaning that the numbers will not be skewed by one or two hyper-success stories that boost the average but leave the masses to the wills of chance.

The few hazards that there are when it comes to investing in real property are for the most part easy to overcome. This is because by making smart choices with respect to real estate agents, property acquisitions, property management, accounting, tenant selection and general attitude, it is easy to minimize your chances of making money on a scale that few other investments can afford.