Purchasing real estate is a good way to invest your money and provide yourself some increased financial security. It’s a good way to increase cash flow and offers many profitable investment options. Although, if you’re new to real estate investing, you may ask, “What is real estate investing all about? What are the benefits to me and how can I get started?” We’ll answer all those questions and help you get on your way to investing in real estate now.
What is Real Estate Investing?
Real estate is a tangible, cash-generating asset, much like gold or silver, and appreciates in values just like these precious metals. Being a tangible asset, however, it does not function like a bond or stock that can quickly lose value; it remains an excellent, long-term way to invest.
Real estate investors benefit from financial leverage, using a mortgage to build wealth in a way that other forms of investments do not. Real estate investment has proven to be a powerful method of creating wealth over time and there are three main forms of return-on-investment (ROI): cash flow, return on taxes and appreciation.
Cash flow represents the most direct type of return, since it is money you can “put in your pocket” right away. Investing in real estate is a way to increase your cash flow. That, in turn, can provide the working capital you need to further expand your investment opportunities and obtain greater financial security.
RETURN ON TAXES
Many investors in higher tax brackets are less concerned with cash return and more focused on the tax advantages of real estate investment. A great tax benefit for the new investor is a first-year, 100% tax deduction for up to $100,000 of business equipment purchased. This would include appliances. Then there’s also the tax benefits of being able to deduct mortgage insurance as well as points paid on a home loan.
The largest ROI is typically from home appreciation. Properties can have significant increases in value over time and if you have long-term goals, one option is to buy land without a structure on the property. If you buy property in the path of development, you may be able to sell at a profit in the future, perhaps when you’re ready to retire and need more income.
What Are the Benefits to Real Estate Investing?
Real estate is such a smart investment option because you can maximize your ROI by finding excellent properties that can be purchased at a great price. Some properties may need more work that others, but with a little TLC, it can be turned into a nice rental property. Renting property allows for a steady and reliable stream of cash flow from the rental payments since there is a high occupancy demand for a well-kept and reasonably priced rental property.
START INVESTING IN REAL ESTATE NOW
Some basic strategies can be used successfully in all real estate market conditions and get you started on becoming a real estate investor:
- Do your research: Educate yourself about the differences between renting and “flipping” properties and which markets offer the best opportunity.
- Select an area of interest: Choose an area where you think you could get a satisfactory return on your properties. Assess the true value of these properties based on when you expect to rent or sell the property. Keep in mind, the value of a particular house is not solely what it appraises for, but also what someone is willing to pay to rent or buy.
- Learn about your market: This will help save you time by avoiding homes that are not worth the investment.
- Enlist the aid of a real estate professional. A real estate professional can help you gain a more concise picture of where your interests should lie.
- Contact a reputable mortgage lender: A good mortgage banker can help you determine which mortgage options are best for your situation and answer any questions you may have. Whether you decide to rent or flip your investment property, there are some excellent financing options available. Investing in real estate is among the best ways to develop income streams and offers many profitable investment options. Knowing your market and having a plan before you begin to invest is key in your success as a real estate investor. Determine your best interest and take the plunge; your pockets will thank you for it later!