The Importance of Real Estate

How Important Is Housing To The U.S. Economy? http://www.bostonconnect.com/from-the-experts/1572/

Both research and history have shown that there is a strong relationship between real estate prices, especially housing prices, and the economic cycles of our nation. When we have a healthy housing market with strong prices, our economy tends to flourish; however the opposite is also true. When the housing market is hurting and home prices plummet, we tend to face periods of recession. 

For the vast majority of Americans, our homes are the greatest assets on our balance sheets. Purchasing a home provides the home buyer with a number of things, including a means of liquidity, financial self-confidence, and an investment in which the value of the home is expected to appreciate over time. Spending money on the purchase of a home is one of many things that helps fuel the economy, and when we gain that financial self-confidence from buying a home we tend to continue to spend and invest, continuing a healthy economic cycle.

However, there is a point when too much spending, specifically spending based on debt, becomes a major problem for the economy. During our recent housing crisis and economic downturn, home buyers were purchasing homes left and right, planning on flipping them for a profit. And during this time banks began to offer loosely structured, interest-only type home loans, making it very easy for consumers to qualify for and take advantage of these loans. Home prices initially jumped, but eventually began to plummet as the inability to pay off the loans caught up to consumers and homes began to foreclose. This left banks with high inventories of low value homes during a time when the demand for homes was now nonexistent, placing our nation into a recession.

Our nation is currently in a state of recovering from the housing crisis and subsequent recession. Banks are now working outstanding debt off of their balance sheets, tightening their credit policies and further analyzing creditworthiness, and selling their inventory of homes to knowledgeable investors who understand the involved risks. It will take some time, but with smarter and continual spending to fuel the economy, Americans will see a time of economic prosperity again.

Simple Ways To Invest In Real Estate

http://www.investopedia.com/articles/pf/06/realestateinvest.asp#axzz26fN3JLBM

With research and knowledge about the property you are considering investing in, real estate investment can be a relatively safe way to earn a return on your money. There are many ways in which an individual or group of individuals can invest in real estate.

Investment in basic rental properties is when an individual purchases a piece of property and rents it out for income. With this type of investment, rent should be high enough to cover the mortgage, taxes, and maintenance costs of the property. The purpose of this type of investment is to rent out the property long enough to pay the mortgage, leaving the owner with a high value asset that can either be sold or continued to be rented out for income. The house I live in right now in College Station was purchased by my parents as a rental property investment. My roommates pay enough rent to my parents to cover the costs mentioned above, so that down the road my parents will be left with a valuable asset that has been paid off.

Real Estate Investments Groups are essentially like small mutual funds for rental properties. Companies will buy or build groups of rental properties and allow investors to purchase individual units. The company will take care of all the maintenance and operations of the units, and just charge the investor a percentage of the monthly rent. With this type of investment, an investor can create a steady cash inflow without having to directly manage the property.

Real Estate Trading is a type of investment where investors purchase a property with the intention of flipping it for a profit in the short term. Typically an investor will only hold on to the property for a matter of months. The investor may purchase a property he or she believes is undervalued with the intent of flipping it for a profit right away; or they may purchase a property, take the time to add value to the property through improvements, and sell it later on down the road for a profit.

Real Estate Investment Trusts (REITs) are created when a corporation or trust uses investors' money to purchase and operate income properties. REITs are bought and sold on the major exchanges, just like stocks in the stock market. To maintain its status as a REIT, the corporation must pay out 90% of its taxable profits as dividends. This allows REITs to avoid paying corporate income taxes. REITs also allow investors into commercial investments, which eliminates the need for a realtor to help you cash out of your investment. REITs are a great investment for stock market investors that are looking for regular income.