Before you invest in real estate, it’s important to know a few basics about this type of investment. Real estate is much like investing in stocks, but it has some key differences. You’ll need to know the basics to understand the risks involved and how to ask the right questions when presented with information. Listed below are some common mistakes people make in real estate investing, as well as some tips that can help you avoid making them.

Buying and holding

Buying and holding real estate is an excellent way to build wealth and recurring income. While this strategy requires work and research, the payoff can be significant, especially if you buy property in an area with good growth potential. You should also consider the cost of maintaining the property in order to attract renters and maximize its potential for growth. Buying rental properties in good markets can result in healthier overall returns. Listed below are the benefits of this strategy.

Land speculation

While the global economy is growing at a steady pace, land speculators continue to harvest huge profits. Ethiopia, for example, has recently enacted the Land Use Act to combat the growth of land prices. But despite the laws, land scarcity is still a big issue, and Ethiopians are not exempt from the specter of speculative activity. This study examines the motivational factors for land speculators in Ethiopia.

Investing through a mortgage lender

There are advantages and disadvantages to investing through a mortgage lender. An owner-financed buyer has a lot more flexibility, and they may have a better understanding of the local market, and be more interested in investing locally. Mortgage lenders have access to a wide range of loan products, and they often charge higher interest rates and points to offset the risk of investing in a mortgage. A mortgage broker can help you choose the best option based on your needs, but you must do your homework to determine which is best for your situation.

Investing through a real estate investment trust

An REIT is a company that invests in real estate. The company’s shares will pay out dividends that are tax deductible. Dividends are generally 90 percent or more of the profits. Dividends are also distributed among all REIT shareholders. By monitoring the share price, you can decide when it is at its peak. Selling a share of REIT can net you $150. However, it is important to pay close attention to share prices and to avoid losing money.

Investing through an investment club

Investing through an investment club can be a good way to make investments without the help of unscrupulous brokers. These organizations are comprised of like-minded people who have the same goals and can also provide the social aspect of learning about investments. They also may generate higher investment returns. However, it is important to understand that you cannot control your investments by joining a traditional investment club. There may be dues involved and you must invest regularly.