Although real estate investment is a lucrative asset, there are also risks that can be incurred if care is not taken. To maximize returns and minimize losses on your real estate investment, you must be able to manage both the assets and liabilities.
In this blog post, you will learn about real estate assets and liabilities and how to balance both for a profitable investment.
Real Estate Assets
These are real estate resources such as property and stocks that yield returns. Real estate assets can be categorized into two (2), they are;
- Real estate properties; which include land, residential, commercial and industrial properties.
- Real estate stocks; which include equity, mortgage security, etc.
Assets in Real Estate Investment
- Real Estate Properties
- Land: Raw, vacant or undeveloped property.
- Residential properties: Mainly for living purposes such as single-family homes, apartments, or townhouses.
- Commercial properties: For business purposes such as, office buildings, and retail outlets.
- Industrial properties: For manufacturing, warehousing, and distribution facilities.
2. Real Estate Investment Trusts (REITs)
- Equity REITs; income-producing real estate properties, such as office buildings, apartment complexes, retail centers, and industrial properties.
- Mortgage REITs; including mortgage loans, mortgage-backed securities, and other real estate-related debt instruments.
- Hybrid REITs; a combination of both equity and mortgage REITs. Which means to invest in both properties and mortgage-related securities.
- Specialized REITs; investment in specific property type, such as healthcare, self-storage, or data centers.
- Diversified REITs; to invest in a variety of property types, so as to provide diversification and reduce risk on investment.
3. Rental/lease income generated on real estate properties.
4. Tax benefits on real estate properties, income tax deduction, low rate dividend tax, etc.
Benefits Of Real Estate Assets
- Real estate appreciation; property value increases over time.
- Tax benefits from owned property such as deduction on property tax, mortgage interest, etc.
- Investment returns such as capital gains, etc.
- Passive income from rentals, lease, etc.
- Hedge against inflation; protect financial value against inflation rise
Real Estate Liabilities
These are financial obligations required to be made by a real estate property owner or investor. They include mortgages, loans, property taxes, and other financial requirements.
Liabilities in Real Estate Investment
- Property management cost include cost of repairs, major renovation, insurance and regular maintenance.
- Mortgage including principal cost, interest on mortgage cost, etc.
- Property acquisition loan including money borrowed from bank, relatives, etc.
- Tax Rates based on the type of real estate property.
- Interest Rates; the percentage returns on loan.
Conclusion
At Sterling Homes, we are not just about selling properties, we understand that your property is more than just an asset, it is an investment. This is why we always provide tips on property ownership to ensure our property investors maximize the full potential of their property.
You can visit our website at Sterling Homes Limited to read up on other helpful content. You can also check out affordable property available for sales.