Five Essential Tips & Tricks For Real Estate Investing
For a beginner in the field of real estate, you have many things to learn. As compared to stock investment, real estate is relatively challenging because of the many financial, legal and many due diligence necessities involved.
This makes it necessary for you to equip yourself with the basics of real estate investment before thinking of getting that degree. We provide you with five tips for real estate development below:
1. Location is Important
The saying that “location matters” is one of the most truthful in the field of real estate investing. It, therefore, follows that you should take into account the property’s location before signing up for anything. Experts advise that you should pick a lousy house in the best towns.
Picking a bad house in a promising street is wise because it gives you a chance to boost equity. Generally, the house may be bad, but it is on a good street. This means that it only needs a little bit of improvement and selling it to a person who wants a house that is ready to move in. This is what the legends in the real estate business term as “fixing and flipping.”
2. Consider Wholesale Properties
In a way, investing in real estate is similar to investing in the stock market because they both involve pursuit for the best deals. If you are a professional in stock market investing, the chances are that you will not be settling for stocks that you will hold for extended periods. Instead, you will use the Warren Buffer principle that advocates for being greedy when most people are afraid. Buy as much beaten down stocks and make a fortune from them when the prices turn around.
In real estate, this is exactly the drill. Wherever possible, avoid paying the “full price” for properties. Instead, opt for wholesale properties that are being sold at huge discounts. While it is true that the properties might still need some work, if you have estimated their total costs for rehab, you will notice that you stand a chance of making a fortune out of them.
According to ThinkConveyance, you can make a fortune by investing in a $20,000 property, then adding double to its selling price. This underlines why investors choose real estate as their preferred way of maximizing returns on investments.
3. Understand the Tax Benefits
Our government administrators depend on the private investors to shelter people. This explains why the government is responsible when private investors fail to provide housing. To prevent this, the government is keen on offering huge tax benefits to real estate investors with one of the most popular ones being the depreciation write-off. This means that when you purchase a house, the government will write-off the building’s depreciation as a way of a tax deduction. While it is true that you will have to ask for advice from your tax advisor, it is safe to expect a huge depreciation of over 27 years for a residential house and 39 years and a half for a commercial building.
4. Check Your Credit Report
In a bid to start or continue with your real estate investment, you might have to borrow some money. This means that your credit report will come into play and it is worth checking it over.
In case your credit report has some mistaken information, make sure that you resolve them as quickly as possible. If the claims are genuine, the authorities will work to improve your credit report. Banks will have to look at your credit report before approving your loan.
5. Use the “1% Rule.”
In case you want to purchase a property for your tenants, the realtors at http://savewithjohnanddave.com/ advise that using the “1% Rule” is a wise thing, especially if you’re going to determine whether the property’s price is worth it or not.
According to the rule, any property meant for producing income must give you back 1% of the price you paid for it monthly. For instance, if a house goes for $150,000, it should give you back at least $ 1,500 monthly.
It is true that investing in real estate is a good idea as it provides huge returns. However, it is important to note that some people have gone into bankruptcy because of the same. It is therefore important to know what you are signing up for before taking the path.