There are many different types of investments you can make in life. Some are meant to provide short-term gains, whereas others will have you in it for the long haul, waiting for that asset or investment to rise in value. Investing in real estate is often seen as one of the safest investment routes to take. It doesn’t offer quick turnaround profits; instead, it requires you to make a longer-term commitment to enjoy maximum returns. If this is the kind of investment that seems right for your portfolio, but you’ve never invested in property before, there’s no question that it can seem intimidating.
These five essential tips are perfect for first-time real estate investors such as yourself and can help you build up the confidence to take the plunge.
Take Emotion Out of the Investment
One big mistake that first-time real estate investors can make is to get emotional about the property they purchase. It’s easy to start thinking in terms of what you like and don’t like but remember that it’s not about you. You need to think of the property in terms of financial returns only. Is it a good investment? Can you rent/lease the property? Will it grow in value? The investment is nothing more than a business decision.
Are Your Finances in Order?
Before you can even think about looking at real estate investments, you need to be sure you’re ready financially. Do you have the funds saved for a down payment? What about pre-approval, what can you afford to spend? Do you even qualify for a bank loan? Doing this before you start shopping around for real estate means you’ll be ready to make an offer once something catches your eye.
Expert real estate investors often suggest starting small. This means choosing a small property that is an affordable price. You can always build on your investments in the future, but at least this is a solid way to get started.
Learn Ways to Lower Taxes
Because taxes can be pretty hefty, it’s always wise to find ways you can lower them. Lowering taxes means you’ll then increase your cash flow, which can open the door to more investments if you choose.
Cost segregation is something that you can look into as a solution, and this is something a company such as RE Cost Seg can help with. In a nutshell, it provides real estate investors with a way to lower their taxable income, which means you’ll be paying less in taxes. It is a multi-pronged approach that will identify and reclassify faster-depreciating assets, minimize your taxes and then maximize profits. This can work for different asset types.
Are You Ready to Be a Landlord?
Whether you plan on keeping the property for just a couple of years or the long term, you will be acting as a landlord. This isn’t something you want to take lightly, as you need to be sure the property is always occupied. If your property sits empty, that means you’re the one paying the mortgage rather than a tenant.
Location, Location, Location
Here’s one thing that applies whether you’re buying a property to live in or to rent out. Location always matters when it comes to real estate, so take your time and research the different neighborhoods and demographics. Up-and-coming areas can be very enticing to an investor, as they can provide some of the greatest returns. Be advised though: they do carry risk, as you don’t know what that area will top out as.
If fear of the unknown has been holding you back from investing in real estate up until this point, it may be time to face it head-on and get into the market. These tips can help you do that in a seamless and less stressful way.