There is a reason many investors insist that real estate should be a sizeable part of a person’s investment portfolio and that is because the real estate industry has turned so many people into wealthy millionaires. The sector is ever-growing since there is always a demand for housing, office spaces, parks, event centers, banks, hospitals, and so on.
As the world continues to increase in population, people like the housing development president- Doug Ebenstein make brilliant investment decisions by filling the gap between the rising population and adequate housing. Before we dive into how profitable the real estate business is, let us take a brief look at Doug Ebenstein; someone whom we can say has done well for himself in this space.
Who is Douglas Ebenstein?
Doug is the President of Capital Commercial Properties, Inc., a property development, and real estate company based in Florida. The business was established in 1961 by Doug’s father, Norman Ebenstein and since its inception till date, the company has made many giant strides.
Capital Commercial Properties has headed several commercial projects in the U.S., some of which include multi-family residential projects, and world-class shopping centers. While the company’s footprints can be seen all over the United States, the company seems to be more focused on just three states, namely Virginia, Maryland, and Washington D.C.
In 2016, Doug’s father passed away and he took over the company, carrying on his father’s legacy of excellence through hard work and maintaining the company’s standards. Mr. Ebenstein runs several other companies aside from Capital Commercial Properties, Inc., and is the President of one of the best Asian shopping centers on the East Coast- the Eden Center.
Other properties he manages include:
- Timonium Square, Timonium, Maryland.
- Belair Plaza Shopping Center, Johnstown, Pennsylvania.
- Hillandale Shopping Center, Silver Spring, Maryland.
- Stoney Mill Square, Silver Spring, Maryland.
- Sulivan Place Retail, Alexandria, Virginia. Click here to learn more about the Eden Center.
What is Real Estate?
When the word real estate is mentioned, the first thing that comes to most people’s minds is a home or a physical structure, but the concept is not limited to just this. Real estate also includes underground rights of land, as well as air space rights.
But to avoid complications it is often described as land with any tangible physical improvements done on it; these improvements could be an actual structure or a road. Real estate can be anything from luxury apartments in California to untouched lands in the Amazon rain forest.
Types of Real Estate
Real estate can be divided into five main categories:
1. Commercial: These include any property used for business purposes, like gas stations, offices, hotels, apartment complexes, restaurants, theaters, hospitals, stores, and shopping centers.
2. Residential: Includes properties used exclusively for residential purposes. These are condominiums, single-family homes, duplexes, vacation homes, multigenerational homes, townhouses, cooperatives, and multifamily homes.
3. Special Purpose: These are public properties such as schools, government buildings, cemeteries, parks, libraries, and places of worship.
4. Industrial: These are properties used for production, manufacturing, research and development, storage, and distribution. Examples are warehouses, power plants, and factories.
5. Land: Includes agricultural land, vacant land, and underdeveloped land.
Why Invest in Real Estate?
There are several benefits investors in the real estate business enjoy that keep them constantly excited about it. People who are considering entering this space will also find these perks impressive and enticing. They are:
Tax Advantage
There are numerous tax breaks and deductions that investors take advantage of to save money. One is that the cost of owning, managing, and operating a property can be deducted from your taxable income throughout the useful life of the building. Also, by utilizing a 1031 exchange, an investor may be able to defer capital gains. Visit https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx#:~:text to learn more about the 1031 exchange.
Mortgage Payments
If you own rental properties, you do not have to worry about mortgage payments, and other expenses. This is because the rent you collect from your tenants is more than enough to take care of these expenses. So, in the real sense, your tenants are helping you pay for the building while you earn passively from it. Because of this amazing benefit, the property owners must keep their tenants happy to avoid the many consequences that come from having vacant spaces.
Appreciation
People feel safe investing in real estate because the value of properties tends to increase over time. Aside from their values, rents also increase with time, and factors like development and constant growth of a country’s economy also influence price increase.
This is because as a country’s economy grows, more businesses move in to take advantage of this growth, and of course, these businesses and companies need spaces to operate. A combination of these factors makes real estate in such places quite attractive and expensive.
Hedge Against Inflation
While most people fear inflation, the reverse is the case for investors in this industry because apparently, inflation is good for property business. As prices of commodities go up, so do the rental income and property value. Essentially, investing in real estate protects you from both the immediate effects of inflation and the long-term effects.
Cash Flow
This is the net spendable income from a real estate investment after the overhead or operating expenses and mortgages have been settled. Usually, cash flow strengthens as you pay more of your mortgage and build equity in the property. A good investment should offer a cash flow of 6% or higher.
Passive Income
Owning rental properties is one of the most lucrative ways one can earn passively. While how much one makes from this type of investment depends on the location and quality of the property, property owners rarely make less than $5000 a month from rent.
Final Thoughts
Before you acquire a rental property, you must consider the factors that make one profitable. While real estate is generally profitable, it is possible to make unprofitable investments in this industry. Consider the following before making a purchase:
- Neighborhood
- Average rent
- Crime history
- Amenities
- Number of vacancies and listings
- Natural disasters