3 posts - 150 words each DUE Nov. 22
pearl424
3postsrealestate.docxClaire:
During past 7 weeks I myself learned a lot about real estate, the transactions, how the brokers, investors, buyers, sellers do their transactions, make the right decisions and so on. While it may be everyone's wish to own a property, there are some risks that need to be considered before making any financial decision. Onnes should weigh all the advantages and disadvantages of the real estate especially when the real estate decisions involve investing. It is one thing that a buyer is interested for their personal long time use, and another thing if the buyer is interested in a real estate as an income producing such as buying an apartment complex and renting those units out to get the most income that is possible. Investors should consider a lot of things to find out if the investing will have more advantages or they are at risk by higher percentage of disadvantages. In other words successful investor should be able to analyze carefully all the risks and returns by the opportunity of the investment. Evaluating the competitive environment, forecasting cash flows, making the financial decision are all processes of analysis methods. When one thinks about the advantages, investors are more motivated with the cash flow of the operation, the possible value appreciation, portfolio diversification, and financial leverage. While there could be many advantages of investing in a property one should also weigh the disadvantages of investing also. Real estate requires large capital, investing in a property is risky, and not all investors would be suitable for risk exposure. There is also risk of changes in economic conditions which may have significant amount of impact on the renters.
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Jerry:
Deciding to invest in real estate is a major financial decision for a person to make. The advantages of investing are cash flow from operations, appreciation, portfolio diversification and financial leverage. The cash flow of operations comes from rent paid by tenants for the use of property space. The investor uses this money to pay property taxes, property management and maintenance. The after-tax cash flow is the amount of money after operating expenses are paid. The possible value appreciation is another advantage. Investing in real estate also helps to diverse your portfolio. The financial leverage of investment in real estate is debt capital used to buy investment properties.
The disadvantage of investing in real estate is that it has many risks. A major risk of this type of investment is the economic conditions which affect the market. A good example of this is the housing crisis of 2007. Factors outside of your investment can have a major impact on your investment. Another disadvantage is the large capital requirements needed to make an investment. Real estate investing has a disadvantage in liquidity when compared to other types of investments. Another disadvantage of this type of investment is that requires management and a great deal of time overseeing. Purchasing real estate is more difficult to buy than other assets and unknown factors are hard to predict.
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Carla:
It seems the advantages in investing in real estate far out weigh the disadvantages. Our reading this week lists several advantages. First we look at cash flow, which should be number one on my list. Cash flow would be the monies collected, or the revenue, from property (Floyd & Allen, p. 400). Another listed advantage is appreciation. Appreciation is the increase in value of a piece of real estate (Floyd & Allen, p. 400). According to the text it should increase "at the rate of inflation", now you want to consider investing in property that was the potential for market value growth (Floyd & Allen, p. 400). Diversification of the portfolio is listed as another advantage to investing in real estate. This is simply adding investment real estate to an already formed portfolio, so that you get the highest rate of return while having a wide variety of investments (Floyd & Allen, p. 401). Financial leverage is what i would consider as both an advantage and disadvantage. Since you are using as the text says "other people's money" one would have less of their own funds invested and use the other money to incur revenue (Floyd & Allen, p. 401).
