The different types of real investment from which you can generate profit are:

1.Real estate investment trust (REIT): You have to become a member of this corporation for doing real estate business. It involves major exchanges and acquires properties by using your money. It will help you generate a regular income and you will get exposure to non-residential buildings also.

2.Investment groups: It is like a mutual fund, where you need to be a member of the investors’ group. You have to let out the single or multiple units that you owe, to the management company. The company will acquire the property and do maintenance and renovation. The company may also rent out your properties, and will receive a percentage of the monthly rent you receive.

3.Trading: If you want to invest in real estate trading, you have to buy and resell a property within a very short time span. It is also known as ‘flipping’. You don’t have to spend money to develop the property. But, as it involves a large amount of money, you may incur a considerable loss when the market is bearish.

4.Rental: If you have a current mortgage on your home, you can rent out a portion of it, to pay towards the monthly mortgage payment, insurance, maintenance charge and other costs. If the property appraisal increases over time, you will also benefit from capital appreciation.

Pros and cons of real estate investment

Some of the advantages of investing in real estate are:

Tangible asset: It is a tangible form of investing. You can physically see and feel your investment, when you put your money in properties.

Tax benefits: You can claim deductions on your tax returns like, amount paid towards maintenance and repairing, interest paid on loan, amount paid towards insurance, agent’s charges, etc. You can also claim tax deduction if the cost of keeping the property exceeds the income you gain from it.

High leverage: You can purchase investing property at 80% loan-to-value ratio or upto 90% loan-to-value ratio, including mortgage insurance. Due to its high leverage, it will give you high return at a lower risk and you will have less personal finance tied up with the property.

Long term: It is a long term investment, which can fund you after your retirement. As rental housing is always increasing in price, it is a very good option for long term investment.

Some of the disadvantages of investing in real estate are:

No liquidity: If you want to sell your property because you are not getting the income you want to have, it will be a loss for you. Not only you have to wait for months but also you may have to sell the property as less than its real value.

Bad tenants: You will be having nightmares with your property if you have bad tenants. They can refuse to pay the rent, damage your property and refuse to leave. It will take you months to resolve this type of problem.

Ongoing cost: In addition to the normal costs associated with the property, you will also have to bear the costs for maintenance. If the property is new, you have to pay from your own pocket towards the mortgage in case your property is untenanted.

The real estate market is still not fully normalized after the liquidity crunch of 2007, but, according to the market analysts, it is high time for real estate investment. If you are persistent and consistent, you will be able to generate wealth over a period of time and can secure your financial future.

Scenario of real estate market in California

After the recession of 2007, the real estate market in California is still on its way to recovery. In comparison to income and rents, the price of houses are still high. Banks have announced that a mortgage that is maximum of three times the home buyer’s annual income which comes with a down payment of 20% can be considered as safe.

On March 26, 2010, the governor of California, Schwarzenegger, signed the California Home Buyer Tax Credit, which allots upto 5% of the sale price ($10,000), to certain home buyers. It means that as a qualified buyer, you can get $3,333 as a credit, if you have state taxes due. This tax credit is applicable to those homes that close escrow on or after May 1, 2010.

The total allocation of $200 million is divided equally between first time home buyers and buyers of existing homes. But the main disadvantage of this offer is that, it is offered on first-come first-served basis. The California Association of Realtors has predicted, on the basis of number of homes in escrow, that, this fund will be depleted before the end of May 2010.

The home buying process

Though all the states in the US involves basically the same process in buying a home, still there is a slight variation from state to state. The steps to buy a home in California are:

* You should hire a buyer’s agent: In California, you should hire a real estate agent, who will act as both buyer’s and seller’s agent. He will represent both parties to a sale and have a fiduciary duty to look out for your best interests.

* Get yourself pre-qualified: After your agent has gone through your credit report and has referred you to a mortgage broker, you have to ask the lender for a pre-approval letter, which will be a verification of your income. You need to choose mortgage type and determine the maximum amount you want to borrow.

* Search for homes: Ask your agent to search for homes that satisfy your needs and after you have shortlisted a number of homes, you can see those.

* Give a purchase offer: Give a purchase order in writing to the seller through your agent.

* Negotiate with seller: You should expect that the seller will give you a counter offer. You can negotiate with the seller and finalize a price.

* Deposit money: If your purchase offer is accepted, you should deposit earnest money check with the appropriate party. In the contract it should be written that, the money will be refunded to you,, if you wish to cancel the contract.

* Open escrow: You should ask your agent to open escrow and title and get the detailed information about the escrow officer. You should pass on the information to your lender and insurance agent.

* Inspect home: You should conduct a inspection on the home by a professional home inspector. If there is any need for repair and renovation, request the seller to do so.

* Deposit fund: You need to sign the escrow documents and deposit fund through a certified check.

* Close escrow: After the change of title, property deed, etc are recorded in the public records, you have to close your escrow.

The process of buying a real estate property is very much laborious and discouraging. But, if you have the proper knowledge and preparation, you will experience such a home buying experience that will be smooth and pleasant.

Ask around your friends, co-worker and family.  If they know a landlord or property manager that has a great reputation then you could be looking at renting one of the best apartments available and out there.  A landlord who heavily screens their prospective tenants to the point of seeking and paying for criminal record checks may in fact be doing you as the potential renter a major favor.  These landlords and property managers who go to this length are not only protecting their personal investments and interests, but also protecting the interests of their tenants.  This is a way to develop a solid reputation for renting the best apartments to the best people they can find.

If you as a tenant have a maintenance problem that the landlord must attend to in a timely fashion, and those repairs and maintenance are carried out swiftly, this builds on the landlord reputation in a positive way.  This also paints the landlord as being one who rents some of the best apartments in the area.