The objective of investing in real estate is the same as any investment; put your money to work today so that over time it will grow and you will have more money in the future. The income from the venture must be enough to cover any and all of the expenses associated with the venture; taxes, insurance, utilities, etc.
The basics of national real estate investors are as simple as the game Monopoly; the goal is to purchase properties, generate sufficient rent and avoid bankruptcy so that you can continue to add to your real estate portfolio. The key word in this sentence is “simple”, it may be simple but that does not mean it is easy. One mistake can send you to the poor house quickly.
How do national real estate investors make money? There are several ways:
Appreciation: A property will appreciate when there is a positive development that affects it. This can be a general positive change in the market or a physical change near the building, perhaps a major development will be constructed in the immediate area. A property also appreciates if it is upgraded by the owner; the upgrades make the property more attractive to potential tenants or buyers.
Cash flow income: Cash flow income is that generated by rent. When an investor purchases an apartment building the tenants pay their period rents which allow the owner to enjoy a steady stream of income. Cash flow income can be significant when the investment is well taken up such as storage units, office buildings, single family homes and apartments.
Related income: Related income is that made by people who are actively involved in real estate; real estate brokers and property management companies being but two examples. These industries make money either through commissions on transactions or percentages of the rental income.
Ancillary income: Depending on the real estate investment this can amount to a great deal of money. Ancillary income refers to income from such things as vending machines in an office building or laundry facilities in apartments. This income takes advantage of the fact that there is almost a captive market for the product or service.
There are many opportunists for a wise investor in real estate but it does take time and the willingness to assume some risk.