If you’re like most people, you probably think of Real Estate as a place to live for work, vacation, or family, or as a location for your retirement. But what about using real estate to make money? There are many benefits to investing in properties. Educating yourself about the benefits and best ways to go about buying a property for investment or leveraging your current home for profit, is the first step to creating additional cash flow and growing wealth.
At MY SMART COUSIN, we specialize in helping new property investors conceptualize, fund, and build their real estate empire, penetrate the lucrative market of buying a house for the price of a car, and develop a Real Estate asset plan that will grow with you over time. As seasoned Real Estate Investment Coaches we work hand-in-hand with our clients, with a special focus on Black and Brown folks and women, to implement their strategy and position them for success in today’s ever-changing market.
Are you interested in investing in real estate, but at a loss on how to move from idea to action? If so, read on to learn the first steps you should take, no matter if you’re a first-time homebuyer or an experienced investor!
THE ABC OF REAL ESTATE INVESTING
Real estate investing is the process of acquiring, owning, managing, and typically improving real property (real estate) to generate income from rents, sell it for a profit, or use it as collateral to secure a loan. Real estate is an evergreen asset, meaning that it always has value. It can be a physical space like a house or office, or it can be something full of potential like an undeveloped lot or piece of land. One attribute that all real estate has in common is that the underlying land is a finite resource— as the old saying goes, they’re not making any more land!
There are many different ways to make money through real estate investing.
- The most common way is by buying properties and either renting them out or selling them for a profit. Buying a house for the price of a car is both a low-cost and high-return option for entering the market
- Another avenue for investment is through real estate development projects. In these projects, your investment takes place through lending money to developers who are building new properties or flipping houses. Real estate development can involve buying properties cheaply and selling them after making improvements, or developing properties to hold for a rental.
- Real estate can also be used as collateral for personal or business loans. The key to this strategy is to ensure that you have a solid business plan that will generate cashflow near term so that you can service the loan.
THE TOP BENEFITS OF INVESTING IN REAL ESTATE
· STABILITY AND SECURITY
Real estate has always been considered a safe haven and for good reason. Unlike crypto, high-risk stocks, and similar investments that can fluctuate wildly in value and even result in no underlying value, real estate is much more stable and always hold some residual value through the building or land. Even during times of economic recession, the value of land generally tends to remain flat or increase slightly. This stability makes real estate a great long-term investment, particularly for those who are incorporating real estate into a retirement plan.
In addition to its stability, real estate offers a high degree of security. Once you own a piece of property outright, the only avenues for losing it are through unpaid and ongoing obligations such as property taxes and municipal services (water, sewer services, and the like). This makes real estate an ideal investment for those who are risk-averse. If you are looking for a safe and secure investment with long-term potential, real estate is a great option.
· TAX BENEFITS
There are several reasons why investing in real estate can be a smart move, but one of the most compelling is the potential for tax benefits. When you own a property, you can deduct a variety of expenses including mortgage interest, property insurance, repairs, and more. This can significantly reduce the amount of money you owe in taxes each year.
Additionally, if you sell your property for a profit, you may be able to avoid paying capital gains tax on the sale by reinvesting the funds into another property— consult with a tax pro before proceeding with this.
In short, investing in real estate can be a great way to save money on your taxes. And who doesn’t love being able to keep more of their hard-earned cash?
· APPRECIATION POTENTIAL
Real estate also offers the potential for appreciation of the asset— perhaps because of a growth in the economy increasing the price of the property, or an increase in rents, making the property more valuable. And while there’s no guarantee that your investment will appreciate, historical data shows that real estate values have increased at a rate of four percent to six percent annually over the long term.
When it comes to appreciation potential, there are a few things to keep in mind.
- First, the location of the property is key. Properties in desirable areas tend to appreciate at a higher rate than those in less desirable areas.
- Second, the condition of the property is also important. Investing in a fixer-upper may offer the opportunity to add value through renovations, resulting in greater appreciation potential down the road.
- Finally, the type of property you invest in an impact appreciation potential. For instance, single-family homes tend to appreciate at a higher rate than condominiums or townhomes.
So if you’re thinking about investing in real estate, be sure to keep these factors in mind. With a little research and careful planning, you can maximize your chances of seeing significant returns over time.
· OPPORTUNITY TO LIVE IN THE PROPERTY YOU ARE INVESTING IN
There are many benefits associated with investing in Real Estate, including the opportunity to live in the property you are investing in.
- When you own a home, you have the potential to generate rental income, which can help offset your mortgage payments and provide additional financial security.
- Real estate also gives you the flexibility to rent only parts of the asset— a backyard or pool for an hour or two— rather than the entire property.
- And finally, owning a home gives you a certain amount of control over your living situation, which can be very appealing.
· LEVERAGE
Real estate investing comes with several benefits, chief among them, leverage. When you invest in real estate, you are using debt to increase your returns.
- Leverage allows you to control a property with less money down, which can lead to higher returns on your investment.
- In addition, loans give you the ability to buy more property than you could if you were paying cash. This can help you to build a portfolio of properties more quickly, which can lead to greater profits in the long run.
SUMMARY
Are you ready to experience the benefits of Real Estate Investment? Whether you’re looking for stability and security in your portfolio, or tax benefits that can help reduce your taxable income, investing in real estate can be a great way to achieve your financial goals. With appreciation potential that often outpaces other types of investments and the opportunity to live in the property you’re investing in, real estate offers many advantages over other options. Ready to get started? Contact us to see how we can help.
YOU CAN ALSO READ: THE PROPERTY MANAGEMENT CHECKLIST EVERY LANDLORD SHOULD HAVE
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