Jim Valentine on Real Estate
Some of the world’s biggest fortunes are related to real estate. Whether it be silver, gold, oil, agriculture, development or just plain ownership, over the centuries real estate has contributed to wealth generation. Like most investment opportunities, when you are late to the show it seems as if all the seats are taken, that there are no more opportunities.
This feeling is true no matter what you are finding and when you find it. Examples: Gold/silver in the American West in the 1800s, or suburb subdivisions in the 1950s. Huge windfalls aren’t always evident when you first encounter them.
You must savor the investment opportunity and look at it from many angles. What will it do for you? Are you looking to quadruple your money in a few months, or make a reasonable return over a period of years? Return on investment is commensurate to the risk in all but the rarest cases. You can have a no-risk investment and see a return of 1-2 percent, or you can take a higher risk of loss and get double digit returns. The choice is up to you.
There are numerous ways to approach real estate investment for profit (as opposed to preservation of wealth). If you want to be in the oil business, then look where the oil is. Are you aware that you can be in the oil business without leaving the state of Nevada? Check it out.
Of course, mining is a way of life in Nevada, and you could spend some time looking for a piece of dirt that will scratch that itch for you, that of pulling profitable ore out of the ground.
Subdividing land has been lucrative for many folks over the years. You can get in on a parcel map where you divide a piece of land into 2-4 parcels. It is not as expensive as subdivisions and can provide a good return for the investment and effort. You will need to analyze the feasibility from the costs involved to the potential return for the finished product. A reasonable profit can be made here but is not guaranteed.
When you actually subdivide you split a piece of land into five or more parcels. More conditions must be met creating more costs along the way sometimes making the project unfeasible. The overall investment is higher than parcel maps, but the return can also be higher.
Some folks subdivide and then do the build out as well, build the houses on the lots they’ve created. In theory there is a profit at each stage of the process, but like any other business operation, there is no guarantee of profit if you don’t know what you are doing or fall asleep at the proverbial switch.
Home ownership is a good way to profit in real estate while you get the additional return on your investment of living in and enjoying the home. You can profit from making your payment with after-tax dollars rather than before-tax dollars which is what you are doing paying rent, expensing the interest on your loan, profiting from your improvements and continued maintenance, and the benefit of appreciation.
Appreciation is not guaranteed but occurs more often than not in normal economic circumstances if for no other reason than inflation and economic growth in your community.
When you approach real estate for profit be sure to recognize if you are speculating or investing. Yes, both will always apply, but there is usually a focus on one or the other that drives the decision. You will want to establish your preferred holding period, risk factor, how much you want to invest, and what type of real estate you prefer.
We’ve had investors that only want industrial properties while others only want residential. Which are you? Talk with your agent if you want to explore this further and make your plan.
Return on real estate investments takes time, but the numbers are usually worth it when it comes to realizing the fruits of your investment. Make your plan and work it – you will be happy.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. dpwtigers@hotmail.com.