Are you thinking about becoming a real estate investor? Here are five things that you’ll need to know.
Real estate investing is hotter than ever, and it’s no wonder why. Mortgage rates are low, home prices continue to grow, and demand for rentals is strong. But if you’re interested in investing in real estate, where do you start? Here are five crucial tips I’ve gathered from successful real estate investors to help you out:
1. Don’t stick to your own backyard. Many fledgling real estate investors limit their search to neighborhoods they know well. This might cut into your potential for profit. The best deals might be a bit further away, and emerging neighborhoods might offer better growth potential and tax incentives.
2. Use the 1% rule. A good rule of thumb for real estate investing is to look for properties that will offer a monthly return that is greater than 1% of the sales price. In other words, if a home costs $100,000, you should only invest in it if you expect to get at least $1,000 a month in rent.
3. Don’t over-rehab. An investment property doesn’t have to look like a Pinterest photo shoot. Instead of trying to convert an investment into your dream home, go with middle-of-the-road fixtures—and save yourself both time and money.
4. Look to single-family rentals. Single-family homes tend to consistently appreciate. They are also most likely to attract good tenants, and they are something you have direct experience with—and can evaluate personally.
5. Understand the tax benefits. It pays to know the many possible tax benefits associated with real estate investing. These include deductions for depreciation, mortgage interest deductions, and maintenance, as well as the benefits that come from investing through qualified plans like self-directed IRA accounts.
If you have any questions for me in the meantime about buying a home, investing, or real estate in general, don’t hesitate to give me a call or send me an email. I look forward to hearing from you.