5 Real Estate Investment Tips | Investing in real estate is a great idea provided that you A) know what you want and B) know how to recognize a prime real estate property. The problem, however, lies in the fact that not a lot of people have an in-depth knowledge of the field, which makes both of these two things quite hard to figure out. Fortunately, with a couple of pointers and tips, you should be able to figure out your way around this troublesome topic and make some money off the real estate market in no time. Also, for as long as you have the property in question listed as your permanent place of residence for at least two out of five last years, you can get some capital gains tax pensions benefits upon selling it.
1. Have a plan in mind
Before we even start, you need to keep in mind the fact that you have so many options open. First of all, you can invest in rental real estate and create a passive income for life. Second, you can entrust your funds to a company that specializes in this type of investment in order to ensure a small margin of profit on a regular basis. Then, you may buy a property in order to fix and flip it or you could invest in a property and then sit on it for years (sometimes even decades) before its value skyrockets. Either way, you need to have a plan in mind before investing any of your hard-earned money.
2. The 1 percent rule
When investing in rental real estate, you need to abide by the 1 percent rule. This means that you need to pick a property that returns about 1 percent of its total value every month. Keep in mind that when it comes to renting commercial property, a decent return is 4 to 5 percent every year. Lastly, you need to understand that, in the rental industry, vacancy is downtime that stands to lose you a substantial amount of money. What this means is that the desirability of rental homes in the area that you’re investing in may make all the difference in the world.
3. Look for professional help
One more thing you need to take into consideration is the fact that no amount of short-term research can help you develop an in-depth understanding of the field. This is why you need some professional help. First of all, you need some advice when it comes to real-estate investment planning from experts like those behind Think Money. Second, you might need to find a reliable buyer’s agent in order to ensure that the property in question is, indeed, a prime piece of real estate. Lastly, you might need to have a number of people capable of performing a detailed inspection of the property (ranging from electricians and plumbers all the way to the above-mentioned buyer’s agents).
4. Research the development plan
Another thing you need to keep in mind is the fact that a city council usually publishes a plan that spans decades into the future. For instance, you could pick a suburb in your city and find a city council’s development plan until the year 2035. This way, you’ll have a lot easier job when it comes to figuring out where you want to place your investments. For instance, improvements to educational institutions may make the value of residential property skyrocket. At the same time, improvements in the field of infrastructure might make your commercial property in the area a lot more valuable.
5. Tax benefits
The last thing worth keeping in mind is so many tax benefits that you get when investing in real estate. First of all, you get to benefit from the concept of tax depreciation. You see, every year, your property is worth somewhat less in total value. This means that for as long as you have it, you stand to pay somewhat less in property taxes for each subsequent year. Also, for as long as you have the property in question listed as your permanent place of residence for at least two out of five last years, you can get some capital gains tax benefits upon selling it. Naturally, these two are just the tip of the iceberg of numerous benefits that you’ll be eligible for. Adelaide Quantity Surveyor explains that using a tax depreciation schedule, you can claim the lost depreciation value back in your deductions every year for as long as you own the property.
The very last thing worth considering is the fact that an investment in real estate is a major decision, one that you’re stuck with for years or decades. This is why it’s a decision that you have to make as carefully as possible and take as much time as you need to consider all the factors.
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