Real estate is one of the solid assets people invest in as it generally stays relatively consistent over time.
For those of you just starting off in real estate investments, then you will find a lot to learn if you want to make gains and grow your wealth. Believe it or not, investments in real estate are more complex than stock market investments, due to financial, legal, and detailed due diligence required to make a solid judgment.
So, arming yourself with the correct knowledge, tips and looking at some properties that might be similar to the ones you are looking at investing in will give you a good foundation before making any first-time property purchase.
So, before you grab your money and call to you nearest real estate agent, have a read through these five tips below on the basics to real estate investing:
Location is key
It might sound a bit cliched but location does matter. Before handing over a bunch of money for a property down payment, do make sure that its location is good.
Additional tip: Go to the best street and find the worst house. That is a general rule of thumb for real estate investments.
The general area or neighborhood is good but the house just needs some work, so this presents the opportunity. Often, real estate investors call this fixing and flipping, where they repair and enhance the house only to sell it for a profit.
Look for the best deal. The Warren Buffett principle is to buy at rock bottom prices when everyone else is selling, so you have lots of headroom to turn the investment around, as it will go up again at some stage.
You should avoid paying the asking price for properties. Instead, so-called “wholesale properties” offered at a steep discount are a diamond to invest in. While they might need some work, calculate if the investment is worth the number should you go to sell later.
It’s not uncommon to triple your investment on a property like this.
Be aware of your tax benefits
The government encourages private real estate investors to provide housing for people. In this way, they aren’t left with the responsibility of it.
So this that in mind, it’s good to know that the government will offer significant tax breaks to real estate investors. You can even write off depreciation, so when you buy a property as an investment, the depreciation of that building could be tax deductible.
Consult your tax adviser for the specifics of your property and overall tax position.
You’ll more often than not require some financing to invest in property. So, you will need to check your credit history prior to any real estate investing.
If your credit report shows up any problems that appear to be mistakes, you should get them resolved as soon as possible. Alternatively, you may need to improve your credit rating.
Ready to invest?
Great returns can be made from real estate investing. Do your homework and have a solid credit rating before you get started!