Are we going through a time where real state is not as profit as it was before?

Typically, there are two ways of making a profit by owning real estate. One is by creating cash flow the other is by creating equity.

 Creating equity involves the value of the property. You would buy low and sell high. The difference between what you paid (or actually what you owe, if any) and what you sell for is the equity. I would say in this market, because values of real property have been declining for at least three years, equities are being lost, and there are little to no profits being made that way.

 However, creating cash flows with real estate is another matter. Because the home selling market is bad, the rental market is good. Investors who have rental properties can make a good profit owning and creating cash flow in their properties. That is where the rents you collect exceed the amount of the mortgage principal and interest you pay (if any) and the other costs associated with the management of the property. Rental properties can be and are profitable even when property values are declining. Because rents are high in many markets and owners can experience historically low interest rates on financing, creating cash flows in real estate may be even more profitable now than in the past.

Advertisements
This entry was posted in Real Estate and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s