Feb 8, 2022 | Real Estate
Anyone looking to diversify their investments should consider investing in real estate. Because the value of property generally increases over time, this is a great way to use money to make money. Even though purchasing a house may provide a greater return than leaving that money in a savings account, purchasing property is still a major decision. Everyone has to take their time to evaluate each option carefully before purchasing an investment property.
The Time Required
Owning an investment property is not easy, and it requires a significant amount of time. Potential real estate investors need to evaluate the local market carefully, comparing any potential mortgage payment to the rental income afforded by that property. Landlords also have to identify long-term residents to generate a passive stream of income that will cover expenses related to the property.
The Budget
It is also critical to think about all the expenses that come with owning an investment property. Property owners need to make sure they have enough income to cover not only the mortgage payment but also real estate taxes and homeowners’ insurance. Keep in mind that real estate taxes may be higher for an investment property when compared to a primary residence. Real estate investors should also make sure they have cash aside to cover any emergency repairs.
The Location
The location will play a significant role in driving any potential return on that investment. Ideally, the property should be located near attractive employment opportunities, major roads, and other amenities such as shopping and restaurants. The most important factor in the value of a property is its location, and this is just as true with investment properties as it is with anything else. A property in a good location will likely appreciate more quickly.
Choose The Right Property For Real Estate Investing
There are numerous factors that everyone should evaluate carefully before deciding to purchase property. While real estate investing can provide a significant return, it also comes with a lot of expenses and responsibilities. Everyone has to make sure they have the time and money to properly manage an investment property. If so, investing in real estate could be a great way to diversify assets and build wealth.
Feb 8, 2022 | Real Estate
Anyone looking to diversify their investments should consider investing in real estate. Because the value of property generally increases over time, this is a great way to use money to make money. Even though purchasing a house may provide a greater return than leaving that money in a savings account, purchasing property is still a major decision. Everyone has to take their time to evaluate each option carefully before purchasing an investment property.
The Time Required
Owning an investment property is not easy, and it requires a significant amount of time. Potential real estate investors need to evaluate the local market carefully, comparing any potential mortgage payment to the rental income afforded by that property. Landlords also have to identify long-term residents to generate a passive stream of income that will cover expenses related to the property.
The Budget
It is also critical to think about all the expenses that come with owning an investment property. Property owners need to make sure they have enough income to cover not only the mortgage payment but also real estate taxes and homeowners’ insurance. Keep in mind that real estate taxes may be higher for an investment property when compared to a primary residence. Real estate investors should also make sure they have cash aside to cover any emergency repairs.
The Location
The location will play a significant role in driving any potential return on that investment. Ideally, the property should be located near attractive employment opportunities, major roads, and other amenities such as shopping and restaurants. The most important factor in the value of a property is its location, and this is just as true with investment properties as it is with anything else. A property in a good location will likely appreciate more quickly.
Choose The Right Property For Real Estate Investing
There are numerous factors that everyone should evaluate carefully before deciding to purchase property. While real estate investing can provide a significant return, it also comes with a lot of expenses and responsibilities. Everyone has to make sure they have the time and money to properly manage an investment property. If so, investing in real estate could be a great way to diversify assets and build wealth.
Mar 5, 2020 | Real Estate
Investing in real estate remains one of the best ways to accumulate wealth in America. There are six ways to get started in real estate investing. One way does not require any investment capital, just an investment of your time. Ways to get started include investing in a REIT, buying an incoming-producing property, using a buy-and-hold strategy, flipping houses, crowdfunding, and wholesale deals.
Investing In A REIT
A real estate investment trust (REIT) is an investment instrument that offers a proportional ownership interest in a real estate portfolio that follows a particular investment strategy. A private REIT has a minimum investment that could be $1,000 to $25,000. A publicly-traded REIT sells in shares, just like stocks on the stock exchange. The investment minimum is just one share and some REITs have share prices under $100.
Income-Producing Property
Buy a home and rent it out. For this strategy to work, you do have to deal with the tenant headaches, unless you can afford to outsource the landlord’s work to a property management company.
Buy-And-Hold Strategy
Buy raw land for cheap on the outskirts of a growing town and wait the time necessary for the town to overtake your land for the opportunity to subdivide and develop it for a high price.
Flipping Houses
For those who like doing contracting work, or who partner up with a contractor, there may be profit in buying some fixer-upper homes to renovate and sell for more than the acquisition price plus the renovation costs.
Crowdfunding
Crowdfunding is a way to participate as a small investor in real estate deals and also to fund your own deals.
Wholesale Deals
Wholesale deals can be accomplished with no money down. You work for other investors and secure properties at lower than market prices by controlling them with an offer that is accepted and then assigning the deal to the investors for a fee.
Summary
If you have been thinking about becoming a real estate investor, now is the time to do something about it. Even if you start with only $100 by buying shares in a REIT, at least you got started. Once you get your real estate investment strategy going, you will find it to be a very rewarding experience, if you are careful and make wise decisions.
Be sure to associate with an expert REALTOR® in your marketplace area to get sound advice and information.
Aug 29, 2019 | Real Estate
A 1031 tax exchange is a legal way to defer paying capital gains when selling a property and then buying a “like-kind” property within the allowed period. The time limits allowed are 45 calendar days after the close of the sale of the first property to identify the like-kind property for acquisition and then close the purchase transaction to complete the 1031 exchange within 180 calendar days.
Like-Kind Property
The property’s broad characteristics determine if it is a like-kind property, not the quality of the asset. In real estate investing, there is a wide variety of things that qualify for like-kind exchanges. For example, vacant land is exchangeable for a commercial building, an industrial site, or a portfolio of residential rental properties.
Since all these properties are types of real estate investments made in commerce, they are like-kind properties. It is not permitted to make like-kind exchanges of property for personal use. The properties that qualify for 1031 exchanges are for investment purposes only. Investors need to hold them for at least two years for them to qualify. A 1031 exchange cannot be used to “flip” a property purchased and then resold more quickly.
Equal Or Greater Value
The property for the acquisition side of a 1031 deal must have a value that is equal to or greater than the property sold. There are three ways to identify the property with the sufficient combined value needed for the acquisition, which are:
- Identify up to three properties for the acquisition regardless of their individual values.
- Identify an unlimited amount of properties that have a combined value of up to 200% of the value of the property sold.
- Identify an unlimited amount of properties that exceed 200% of the value of the property sold as long as the acquisition equals 95% of the total value of the identified properties.
Reverse 1031 Exchange
In a reverse 1031 exchange, the property acquisition occurs first and then within 45 calendar days identify the property to sell as part of the 1031 exchange and complete the entire transaction in 180 calendar days.
1031 Exchange Intermediary
A qualified intermediary is necessary to complete a 1031 exchange. The intermediary holds the funds in a segregated escrow account from the sale of the first property and then uses those funds in the acquisition transaction of the identified property.
It is extremely important that the owner of the first property never has direct control over the proceeds from the sale. If the owner takes direct control of those funds, for even just a moment, this triggers a tax event and the capital gains taxes will be due.
Conclusion
A 1031 tax exchange is a very convenient way to defer paying capital gains tax. Use competent legal counsel for the transaction and an intermediary to hold the funds that has a perfect reputation for successfully working with this process.
If you are interested in buying a new property for personal or investment purposes, be sure to contact your trusted real estate professional.
