{"id":119,"date":"2017-09-14T13:17:56","date_gmt":"2017-09-14T13:17:56","guid":{"rendered":"https:\/\/medium.com\/@arthamoney\/understanding-real-estate-economics-c1cde061c05c"},"modified":"2017-09-14T13:17:56","modified_gmt":"2017-09-14T13:17:56","slug":"understanding-real-estate-economics","status":"publish","type":"post","link":"https:\/\/madrasrealty.com\/?p=119","title":{"rendered":"Understanding Real Estate Economics"},"content":{"rendered":"
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Roy Kroc, the man who turned a small hamburger stand into a multi-billion dollar enterprise known worldwide as multi-billion dollar enterprise known worldwide as McDonald\u2019s, once told a reporter that his business was not hamburgers but real estate. Kroc didn\u2019t invent the hamburger restaurant that made him wealthy. He\u2019d obtained the founders\u2019 agreements to let him sell franchises Kroc only earned a small percentage of each franchise sold, not enough to meet expenses, so he devised a way to purchase land upon which franchises would be placed and require franchise owners to lease the land back. Then, as now, real estate can provide extremely profitable returns with estate can provide extremely profitable returns with relatively low risk for both novice and experienced investors if they understand certain principles.<\/p>

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Expectations<\/h4>

Even beginning investors can profit from real estate. After realizing a $40,000 profit on the sale of his home when he realizing a $40,000 profit on the sale of his home when he relocated to another state, Ken B. put a down payment on a new home for himself and bought a fixer-upper for $25,000 cash. He spent another $10,000 fixing it up, then rented it for $450 per month.<\/p>

A couple years later, he sold the home he\u2019d purchased for himself, this time getting a check for $36,000. He put $20,000 down on a bigger home for himself and bought a duplex for $127,000, using $14,000 down. His payments on the duplex are just under $950 per month, and he consistently receives $1,200 per month from tenants For his $49,000 investment, he receives $8,400 profit each year after deducting the duplex mortgage payment. For stocks or mutual funds to provide a similar return, they\u2019d have to achieve a 17% annual return.<\/p>

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Granted, he sometimes has to pay a portion of the mortgage payment while the property is vacant, and he must spend time and money to maintain the property, factors he considers very worthwhile for the return he earns. Since he plans to hold onto the properties for many years, he plans to hold onto the properties for many years, he expects that when he does sell, he\u2019s likely to make a tidy profit from the equity that was paid by tenants for the years he holds onto them.<\/p>

The Housing Bubble<\/h4>

During the housing bubble, many Investors purchased houses with the Idea of renovating and reselling or \u201cflipping\u201d them. They made obscene amounts of money on their flipped properties That Is, until the housing bubble burst. The seller market that permitted property owners to command high prices on their houses vanished, seemingly overnight. The only \u201cflipping\u201d that took place was the sudden *lift to a buyers\u2019 market. Sellers were obligated to pay the mortgages on properties they found difficult to sell as prices dropped.<\/p>

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The housing market collapse didn\u2019t hurt all investors, though it probably presented challenges for most of them. Savvy investors who calculated the risks ahead of time and had a sound contingency plan continued to profit. In a sellers\u2019 market, many investors simply want to move property because it\u2019s easy to do and highly profitable.<\/p>

Buyers\u2019 markets indicate that fewer people can obtain mortgage loans. Successful real estate investors capitalize on turning their properties into rentals while awaiting a on turning their properties into rentals while awaiting a fortuitous marketplace. They may offer traditional leases or lease options. Lease options require some additional deposits from a buyer at the start of a lease and allow the buyer to purchase the property for a predetermined price buyer to purchase the property for a predetermined price during the term of the contract. When the tenant does not purchase it, the additional deposit money is kept by the owner.<\/p>","protected":false},"excerpt":{"rendered":"

Roy Kroc, the man who turned a small hamburger stand into a multi-billion dollar enterprise known worldwide as multi-billion dollar enterprise known worldwide as McDonald\u2019s, once told a reporter that his business was not hamburgers but real estate. Kroc didn\u2019t invent the hamburger restaurant that made him wealthy. He\u2019d obtained the founders\u2019 agreements to let […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-119","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nUnderstanding Real Estate Economics — OpenRealty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/madrasrealty.com\/?p=119\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Understanding Real Estate Economics — OpenRealty\" \/>\n<meta property=\"og:description\" content=\"Roy Kroc, the man who turned a small hamburger stand into a multi-billion dollar enterprise known worldwide as multi-billion dollar enterprise known worldwide as McDonald\u2019s, once told a reporter that his business was not hamburgers but real estate. 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