Choosing Your First Real Estate Investment

Everyone needs a place to stay throughout adulthood, and real estate offers you a unique opportunity to combine your basic need for shelter with the possibility of making a profit. Think about it. The home you purchased to live in can eventually be sold for more than you paid for it, or it can be converted into a rental unit to produce monthly income for years to come. Show me a stock or mutual fund that can do that!

For most people, buying their own home is the first real estate investment they will ever make. Even though it requires a significant down payment, owning a home is usually more cost-effective long-term as you end up building equity, or ownership in the house. Think of all the money you can spend over the years in renting a home, and this money is in a sense wasting away while you rent.

Is your home really an investment? Some commentators state that your home cannot be considered investment property because you’re not renting it out for monthly income. They also state that you have to pay the mortgage, property taxes, and other expenses each month or year. How can this be considered an investment if you keep having to pay money out of pocket? Well, in our opinion, your home must be considered an investment because you are gaining ownership over time (otherwise know as equity). Your home has a good chance of appreciating over the years, and you can sell this home and move into a smaller home when you choose to retire. You can use the profit to help you enjoy your retirement years.

At the time of this writing, the tax law allows you to make significant profits on your home without having to pay taxes on these earnings. A single taxpayer can make a capital gain of $250,000 without paying taxes on this amount, while a married couple can make $500,000. You must have lived in the home for at least two years out of the past five years in order to qualify for this tax exemption (though the 24 months do not have to be continuous).

Real Estate Investment For Your Retirement

Real estate investment can be a fantastic way to build equity, gain capital and increase your net worth as you prepare for retirement. To learn more about the different ways real estate investment can help you in your retirement and create income streams, keep reading.

Equity

Acquiring real estate property over your lifetime can be a great way to build equity. With patience, almost all real estate will appreciate in value over the course of many years, even in a sluggish or down market.

You can then borrow against equity in the property or sell the real estate for cash and use the proceeds for investment opportunities or more liquid income. Putting some of those capital gains into a retirement savings fund could even save on your capital gains taxes while still protecting your nest egg.

Rental Income Streams

A real estate investment property doesn’t have to sit empty. You can earn income on that property through tenants and rent. By renting out a property with a mortgage on it, you can use the rental income to pay most or even all your monthly mortgage, cover maintenance fees and even see a small monthly profit. In the meantime, you’ll be accumulating equity on the home.

Once the property is paid off, that rental income becomes pure profit after maintenance costs while being a landlord can offer you tax breaks on everything from property expenditures to fees for property management companies.

If you’re older or simply don’t have the time to screen tenants, shovel snow and ice off walkways or maintain a property, hiring a property management company can take care of that need. Certainly doing so will cost you money, but they can take care of all the duties and obligations associated with being a landlord.

Flipping Properties

While purchasing low-cost housing, improving it and later reselling it for a profit involves a lot of sweat and hard work, it can be a great low stress “job” for the retiree. Before you invest in real estate flipping, invest your time in location research, planning and finding a great real estate agent. This is one area where the virtue of patience can pay off handsomely.

Reverse Mortgages

A reverse mortgage can turn your property equity into liquid cash while you retain ownership on the property. Typically, no payments are required on the home equity loan until you are either no longer resident on the property or you sell it.

However, interest will begin to accumulate on the property as soon as the reverse mortgage process begins. This means you won’t have to make payments, but your loan will be accruing interest. The loan is then paid from the proceeds of your estate or, again, once you move or sell the property. If you pass away before the loan is paid, the inheritors of you home would need to do so.

By turning your property equity into cash, you can create an income for yourself during your retirement years. But remember that you will be simultaneously depleting your net worth and the overall value of your estate. So this is a trade off that merits due consideration before jumping in.

Benefits of Real Estate Investments Strategies

Real estate investing has offered investors much better returns than most other investment options. Investment is one of the safest investments available. The security of investments is becoming more and more increased these days. Investment is a safe way to start making your personal wealth and retirement finance provided if you act wisely. Investing offers excellent long term returns and sometimes even short term gains. Investing can bring you high profits if you follow certain tips.

Many countries offer wide investment opportunities. Investors can easily find excellent profits in rentals, rehabs and high-end properties. Buying properties to use as rentals is very successful investment strategy. The high-end properties have powerful demand among investors, especially in the most desirable areas, such as Paris. The most successful strategy is rehabs. Rehabs are also the most risky form of investments. If there is huge demand for finished real estate properties, the opportunity for investors increases widely.

Finished properties provide excellent opportunity for investors who are willing to rehab and then rent or sell properties. Investors who want to sell a property after grasping it for only a few years can benefit from this type of investment strategy. Investors who rehab properties can either sell or rent the rehabbed properties for a worthy premium. Investors can buy a run-down property in a main location at a cheap price, remodel or modernize it and then resell or rent it successfully.

Flipping, Bargain purchase investment strategy, Increase value investment strategy, Double-digit cap rate strategy, and Commercial Investment are the other investment. Flipping involves buying and selling property without actually taking ownership of the property. Flipping enables you to make money with real estate without possessing the property. Bargain purchase strategy involves purchasing property for at least 20% less than the current market value. Increase-value investment strategy involves buying a property for its current market value, remodeling the property in order to increase its value by at least 20%, and then selling it.

Double-digit cap rate investment involves buying a property having a capitalization rate of 10% or more. Commercial Investment involves buying commercial properties that are bigger than a 4 unit apartment building. It is better for investors who are beginners in the field to avoid commercial strategy. On the other hand, if you have experience in real estate investments, you can go for commercial investment as the competition is much less.

Different real estate requires different amounts of time. For example rehab is really time-consuming. Real estate must not choose a time-consuming strategy if you cannot spend much time for real estate business. Some strategies require huge amounts of cash. For example, to buy foreclosure properties whereas buying a property at auction requires little or no cash. The different strategies provide different benefits. It is up to you to choose the strategy you feel more comfortable with. But make sure you choose the right strategy that best suits you, and work accordingly.

Full Time Real Estate Investment & You

The term “real estate investment” can mean many different things to many different people. I want to expand your concept of what real estate investment means to me, and the first concept to grasp is – that there exists a full-time (or greater than part-time) real estate investment business model that works and works very well. As I’ve said before, I know this because I am engaged in it more or less full time and have been engaged in it since I was 12 years old.

Let’s talk about full-time investment for a moment here. The predominant concept of real estate investment and perhaps many other forms of investment is that it is an activity that is mainly passive – part-time. You the investor spends some time, usually part-time engaged in the investment activity from time to time – perhaps in research or oversight, but for the most part you are engaged full-time in something else that is not the investment activity – something that can range from full-time employment to full-time enjoyment or fulltime retirement. The “investor” image, is therefore a somewhat higher level or higher status occupation than most other forms of work (that require active, full attention engagement), implying that you have money to invest – money that is over and above what you need to survive on and that the money is what is doing some meaningful enabling “work” instead of you. In this popular notion, “investment” is work, one step removed from “real work” that requires real time hourly engagement.

The term “investment” is also tied in with the concept of money instead of time. People who spend time in pastimes of their choice are frequently thought of as volunteers, not investors; whereas people who spend “money” – itself a form of “bottled” time, on the same pastimes, are called investors. Investment and real estate investment also implies a form of long-term attention to some form of “business” as distinguished from speculation. Investment and especially long-term investment is regarded as a higher form of engagement as distinguished from speculation, which is regarded as a short-term form of gambling. Finally, in absolute terms, “long-term” investment technically means longer than a year according to the IRS. In real terms, long-term can mean anything longer than a few months.