Real Estate Investment & Real Estate Investing
From Wikipedia, the free encyclopedia
Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development.
Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and is highly cash flow dependent. If these factors are not well understood and managed by the investor, real estate becomes a risky investment. The primary cause of investment failure for real estate is that the investor goes into negative cash flow for a period of time that is not sustainable, often forcing them to resell the property at a loss or go into insolvency.
Everyone knows that you should never sign on the dotted line without reading the contract. This same term applies to loans. Signing a loan without knowing the terms and what everything means can be detrimental to your finances, credit and future investments.
Before you sign on
the dotted line,
1. Interest Rate. The interest rate is the percentage of your loan that is added on every month. The percentage will vary according to the economy and will make a difference in your payments.
2. Fixed Rate. A fixed rate will be an interest rate that stays at the same percentage throughout the entire period of your loan.
3. Variable Rate. A variable rate will change according to the economy and the charts that are stating what the rates should be for interest. A variable rate usually changes every year and adjusts according to a specific given range of percentages.
4. Principal. The principal is what you will be paying on your actual house. Whatever you pay on your principal is what you will see in the end as your investment.
5. Escrow. This is similar to a savings account of your loan. Whatever you put in escrow will accumulate without paying directly into the loan. At the end of the term you can use it to finish paying off the loan or to invest in another loan.
6. Title. A title will be what you get to your home after it is officially yours, stating that the property belongs to you.
7. Deed. A deed will most often be used as a title for a commercial area. Instead of giving ownership it shows that the property is leased to the one who is using it as a business.
8. Home Equity. This is a loan or line of credit that you can get for your home. It will finance up to eight percent of your other loan and get paid back later. This helps if you want to consolidate loans or invest more into the property.
9. Appraisal. After an inspection of the home is made, an appraisal will be made. This will be an estimated value of what the home is worth.
10. Equity. This will be the actual amount of the property that you own. Most likely, it is what is being paid off of your principal amount.
Once you know some of these basic terms, you will be able to expand on your knowledge and find the exact loan that will fit your needs.
These basic definitions will help you in making the right decision for the type of loan that you want.
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