How to invest in real estate?

How to trade?

Real Estate is said to be the anciest form of investing, regarding the owning of lands and its produces. Land is one of the first limited resources that one can think of, as there is only one Planet Earth. Investing in Real Estate grants the owner to the right of disposing of it as he or she wishes, like using it to store goods, to produce goods, to rent, to sell at a higher price or just to hold it.

Nowadays, investing in Real Estate can take diverse forms:

• Buy and hold;
• Buy and rent;
• Buy and resell;
• Invest on an investment fund.

Overall, Real Estate represents a right to dispose of land and infrastructure as the owner pleases. Of course, there are laws and taxes due, that the owner must be aware of. Compared to other assets, Real Estate investing, except through an investment fund, is physical and tangible, and if viewed as a business, it has one of the simplest forms of management.

And, how to analyse?

Analysing investments in Real Estate is interesting, as there isn’t a regulated market as it happens with stocks and bonds, and investors must analyse locally the best areas, the best buildings, the accessabilities, the construction materials, and much more. Price per square meter is the best indicator available to investor and a good guidance to the sentiment of the Real Estate market.

The returns from the stock market take two forms: rent and capital gains (realized or not). Rent is the typically the monthly payment of tenants to the owner for the usage of the land or infrastructure. Capital gains refers to the variations in market price of the Real Estate held, be it realized when it is sold or unrealized when it’s the difference between the current valuation and the acquisition price. This way, Real Estate provides both cash-flow through rent and appreciation through the capital gains, just like stocks provide dividends and market value gains.

In conclusion

Real Estate is an iliquid investment, as it usually it’s transactions take multiple days, weeks, months and even years, as compared to stocks and bonds that can be almost instantly converted into cash or equivalents on the markets. Despite that, Real Estate is considered a safe asset to invest in, due to the simplicity of the “business” when it comes to buy and rent, as there will always be demand to rent houses, stores and storehouses.