When you first think about making a real estate investment there are so many things that you need to learn. Specialists agree that in many regards this is more complicated than stocks because of the legal, due diligence and financial requirements that are involved. The best way to guarantee yourself a successful investment is education. Pedro Martin, Terra Group CEO, highlights the most basic tips that beginners need to receive in order to start on the right foot.
You cannot talk about great real estate investments without discussing location. Before any down payment is made, it is important to be sure you are looking at a property in a really good location. The reason why people tell you to invest in the worst possible house located on the best possible street is that it offers the opportunity to increase equity at a huge pace. Extra money is necessary to make repairs but when you sell, the profit will be much higher than when you put money on a much greater property in a bad neighborhood.
Find Wholesale Properties
You do want to find the best possible deal and in real estate this is often the wholesale option. Making an investment in wholesale properties practically means you get a huge discount. Some work will be needed but you want to run numbers and see if rehab investments are worth ultimate selling price. As an example, you can find options that cost $20,000 and give you a selling point of $40,000.
Understand What Advantages Can Be Gained From Tax Benefits
Governments want to have private investors active on the market, especially when referring to providing housing for citizens. In many countries from around the world real estate investors get very good tax benefits. Depreciation write-offs have to be particularly looked at. As investment property including a building is bought, its depreciation can be written off as a tax deduction. You do want to talk with a tax advisor in order to learn about all specifics but with both commercial and residential properties you can take advantage of depreciation for over 20 years.
Check The Credit Report
Most real estate investors have to borrow money when making real estate investments. Checking the credit report before making an investment is a very good idea since there are sometimes errors that are present and that cause higher interest rates. Improving credit if problems present on the report are legitimate is also a necessity.
To put it as simple as possible, the bank will not be eager to give you money for an investment real estate property as readily as for a home.
1% Rule For Renting Out
Last but not least, in the event you buy properties that will be rented out, the 1% rule is something to be aware of. It practically means that income needs to give you 1% of the buying price. As an example, if the property is bought for $150,000, monthly income through rent needs to be $1,500. If this is not the case, the investment is most likely a bad one.