The first time when I walked into Historic Home in Clinton, I was amazed to see the beauty of architectural home and all the different characteristic of the gorgeous mansion. As my buyers were
Investment - The investing of money or capital in order to gain profitable returns as interest, income, or appreciation in value (source: Dictionary.com)
So, in easy terms Investment of any kind is nothing but the action or the process of investing money for profit or the material result.
(Picture Courtsey- https://all-free-download.com)
Types of Real Estate Investments -
When it comes to any kind of investment many people think about these 4 different types of investment – 1) Bonds 2) Stocks 3) Cash equivalent 4) Real Estate Investment
When it comes to the Real Estate the investment is divided into 4 different aspects and every aspect has its own advantages.
1) Buying Your Own Home – This is the far best and biggest investment anyone can consider. Buying a house means you’re investing in real estate on some level. When you own your home, you won’t actively make money or increase your monthly cash flow off but you built equity on your home, which in turns appreciate your value of the home. Government rewards homeowner by Tax Benefits and more over you gain the happiness of owning your home which is unmatched. Doesn’t all this sound exciting?
There are no cons in buying your own home! It’s always a win-win game for you!
2) Being A Landlord- Wondering how easy to be a landlord? yes owning a property that you rent out is another form of real estate investing. The benefit to this rental income becomes an additional revenue, which can be used for retirement and as an extra income and in few years if you sell off the property it will get appreciated and make more money for your pockets.
Other than needing cash in hand for some upgrades, maintenance if any repairs needed and home insurance as well. The rental would be consistent month in and month out, there could be reason someone doesn’t pay rent or you find yourself in between renters is pretty tough. There’s even less for you to do if you hire a property management company—though that will cut into your profits. Keep in mind, that dealing with renters can be frustrating and time-consuming sometimes. It can also be costly if the renters damage the building or unit of property. You may even have to hire a lawyer if you need to evict a tenant.
Regardless, you may make money simply from being the landlord for the property if everything is done right way and dealt in a right attitude.
3) Doing Flips (as seen on HGTV) – This seems like easy and quick money maker for most of the investor. The key in flipping houses is to buy low priced homes and to make a profit after renovation/necessary changes. And you can’t expect decent profit unless you get the perfect deal for the house. In 2017 alone, over 200,000 single-family homes and condos were flipped!
And remember the shows on HGTV does look easy and quick but it involves more man power, money and time than the reality on any TV show. So better be prepared doing it correctly and wisely. As any other investment the downside of flipping house is the cost on updates/renovations or any potential hazards that comes in between. Buying the correct house with good location/low price is the key to better get profits on your investment. Work with your Real Estate Agent and do your due diligence. This is another amazing trend of investment in Real Estate.
Flipping house seems appealing since it’s a quicker process than renting a property for years. In just months, you could get the house back on the market and (hopefully) turn a nice profit.
4) REIT or Crowd Funding – If none of the above options working for you then there is a new form of option available and its called Crowdfunding for Real Estate and Real estate investment trusts (REITs) are a less conventional way to invest in real estate. What’s an REIT? REITs are companies or trusts that own or finance real estate investments, and they sell shares to investors who hope to receive a percentage of the income made off that real estate investment.
There are many passive/active investors looking out for more group of people ready to invest. You became part of a group who pool their money with other investors, and then lend or invest that money with experienced rental real estate investment property owners.
This is getting very popular nowadays at it does have minimal work as you do not have to research the property, apply for the loan or manage the tenants. Crowdfunding is very attractive option and before making your decision you need to research the company, make sure that the company is legitimate and it should be also a good fit for your needs. The only drawback here is you do not have control over the decision making when it comes to choosing property.
Tax Implications of Real Estate Investing -
When you have multiple income streams and are investing outside your workplace then taxes get challenging. There will be some tax implications on Capital Gain Taxes, Short Term Capital Gains, Long Term Capital Gains or simply Taxation on Rental Income. In any case my advice is to talk to a financial advisor/ CPA for that matter. The professional help is always advisable.
Follow these 6 simple rules when thinking of doing Real Estate Investment
1) Get Educated on the Investment – Learn more about the property, evaluate the town and the neighborhood. Read more about the positives and negatives about investment.
2) Start Small – Start with small projects, don’t jump on doing bigger and difficult projects at the beginning.
3) Set Your Goals – This is far most important thing in any investment, define your goals and stick to your budget.
4) Stay Local- Being local has its own benefits, you know your town, neighborhood, you might have people handy working for you and that way you can maintain the property upkeep.
5) Be Prepared to Take Risk- To get best out of you it’s the first step to take risk, unless you decide nothing is going to happen. Write down all your plans, how you want to go ahead with your project. Get your friends/family involved with decision, define your risk.
6) Go Slow- Do your homework, hire professional like Financial advisor, Real Estate Agent. Ask questions and get help from them. Go slow and easy with every step of the way. Remember it takes a village to get things done rightly!
Final question - Are You Considering Real Estate As An Investment?
At the end ask this question to yourself – Is Real Estate Investment is right for me? The answer is - Real estate can be a fantastic investment - only if you do it the right way!
So be smart and wait for the right time, don’t rush yourself. Real estate investing has its own pros and cons, and may not be for everyone. Before thinking of jumping into any kind of investment get the in-depth knowledge, do your homework and If you’re wondering whether or not real estate investing has a place in your wealth-building plan, sit down and have a conversation with your financial advisor/CPA. And be sure you’re working with an experienced real estate agent to help you along your way.
Believe me if done correctly and wisely Real Estate Investment is great tool for your retirement income. At the end I can vouch on my statement- “It will be tough at the beginning but once you are done the first one, you will be pro for your next one!”
Good luck and as always if you have any questions/ concerns about Real Estate feel free to connect with me, happy to be your help.