Real Estate Investor

Decision Point

When I read Google trend this morning, there are one topic about real estate investor,what is a real estate investor? Base on Wikipedia A real estate investor is someone who  invests in real estate. There are 2 type investor i.e. active and passive investor. An active investor may buy a property, make repairs and/or improvements to the property, and sell it later for a profit. A passive investor might hire a firm to find and manage an investment property for him. Typically, investors choose real estate for several reasons: cash flow, appreciation, depreciation, and tax benefits

A cash flow investor might opt to put 5% or 10% down when acquiring a property. This may allow the investor to obtain favorable financing terms and a lower mortgage payment. This will often result in positive monthly cashflow, crudely derived by subtracting the monthly debt service from the monthly rent.

Appreciation occurs over time, generally, though an investor may "force the equity" in a property by making enhancements to it or the surrounding environment to increase its value. In general, residential real estate is valued by the "comparable sales" method which estimates the value of property under the principle of substitution. The method estimates property values by comparing a subject property to similar properties sold in similar locations within a recent period of time.

Depreciation is one of the many benefits afforded to real estate investors. Though the property is actually increasing in value, the government allows owners to systematically depreciate the property over its projected useful life span. Depreciation is an allowable tax deduction. In addition to depreciation, an investor will usually claim the interest portion of his monthly mortgage payment as a tax deduction.

Real estate investing has become quite popular in recent years due to rising property values and low interest rates. Deflation in property values or a sharp increase in interest rates would dampen the market considerably, however.

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