Mortage & Investment in Real Estate

Posted by nabeelshaukat on September 2nd, 2010

Mortgages in Real Estate

When we talk about real estate, mortgage comes first in the discussion. In today?s economy no one has enough money to purchase a home without taking a loan, even if you have a house you still need finance to make regular maintenance. Mortgage helps to fund maintenance, and purchase of new properties. Mortgages not only benefit individuals, but also investors so that they could purchase or construct properties and resell them to earn profits.

 

Banks and other loan providers normally offer mortgage facility, and take their money back with interest. If someone is failed to pay monthly payments, he/she may face a legal action from these financial institutions. To avoid such issues, lenders are more concerned to give loans to the members of honored social class only.

 

Real Estate Investment

The real estate investor purchases the ownership of property, and then rents it out to tenants and takes a monthly fixed amount from them, or he may purchase a property with the intension to sale it later at a higher price. Moreover, before making an investment in real estate market you should consider the exposure of this market. As it requires a huge investment, so its better to invest when the demand is low and supply is high as in this way you can get a good property in low amount.

 

Public versus Private Markets

The first type of market is public market. In this market, you can invest in the public real estate by purchasing a unit or share in a public limited company. In this case, the management manages the company on behalf of shareholders. The exposure to this real estate market is indirect for shareholders. In this type the share or unit holders are paid with annual dividend.

The other alternative market is private market, where the investor has complete control on real estate properties. In this market the investor owns and manages his real estate property by himself, and receives rent by renting it out, or a lumsum amount by selling it.

Debt and Equity Investments

An investment in equity means the outstanding interest in the property. The investor of equity is the owner of the property. When the value of the property increases, the investor gets a handsome and considerable amount.

 

An investment in debt means lend money on some interest to the purchaser or owner of the real estate property. The borrower repays the interest payments on periodic terms, and at the end of the mortgage term, the borrower repays the principal amount to the lender.

 

The choice of investment in equity or debt depends on the returns expectations and risk tolerance of an investor.

nabeelshaukat

About the Author

nabeelshaukat
Joined: August 12th, 2010
Articles Posted: 193

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