Historically, real estate has generally been considered a safe investment. Though, the 2008 collapse in the housing market was disastrous for many, real estate appears to be gaining stability, nearly a decade later. Many families view owning a home as a necessity and a means of fulfilling the, “American dream.” There are many benefits to owning a home, but one important consideration is the investment value.
For those interested in purchasing real estate for the sole purpose of returning a profit, many investors utilize their property as rental homes. Some investors determine the value of their venture by calculating the net rental yield. The net rental yield calculates the owner’s annual expenses, taxes, insurance, etc.. subtracted from the gross annual rent income, then divides that value by the cost of the property. The value produced from this calculation is referred to as the return on investment (ROI). Rental properties may produce ROI higher than that of stocks or bonds, which is one aspect considered when determining the validity of an investment.
Appreciation is another attractive component of real estate. Rental homes tend to appreciate in value over time when inflation and other factors are considered. The average cost of a home in the U.S. was roughly $315,000 in 2004. Ten years later, the average cost of a home amounted to $566,000. Regardless of profits accrued from renting, a property may generate considerable equity over time. This can be useful if the property is later sold; or, if the owner wishes to apply for an equity line of credit as a means of funding additional investments.
Although, purchasing a home with the intention to rent has proven profitable for some investors, purchasing a home with the intentions to “flip” it, has gained popularity throughout entertainment channels and real estate novices alike. These investors may purchase a dilapidated home in a affluent neighborhood with the aim being to remodel, and later sell, for a substantial profit. This method has been favorable for many real estate investors, in part, due to the significant impact location has on a property’s value.
Though risks always accompany investments, purchasing real estate may be a profitable opportunity for some. If you are considering purchasing real estate and require the formulation of a contract, speak with a real estate attorney in Charlottesville VA. Real estate attorneys are a valuable asset in property litigation. A real estate attorney may be able to develop a contract for the transaction that benefits you.
If you’re in need of real estate closing services, or have a contract dispute, contact Martin Wren, P.C., who have experienced lawyers that represent home buyers and sellers in the Charlottesville area.