Real Estate Investment Tips For New Investors
Considering investing in real estate? This can be a superb way to make money and it is highly rewarding, but it is also a notoriously difficult path to navigate by yourself and especially if you are just starting out. Despite this, there are certain things that you can do which will put you in a good position to succeed in property investment and boost your income. If you are just starting out and are not sure where to start, read on for handy advice which will help to reduce stress and ensure that you are making an intelligent investment and maximizing profit.
Location, Location, Location
There is nothing more important than the location of the property when it comes to real estate. You can always make big improvements to the property itself, but this is not possible with the neighborhood so always choose carefully. One practice which is common amongst experienced investors is to purchase the worst house in a nice neighborhood - this will be cheap to buy, and you can then spend money fixing it up and turning it into a property that matches the location so that you can get the maximum price (known as “fixing and flipping”).
It is also a smart idea to diversify your investments by purchasing properties in different states and cities (try to find emerging cities and neighborhoods). This means that you are increasing your profitability potential with much better opportunities. In addition to this, it will also protect your portfolio against volatile local markets.
Avoid Capital Gains Tax
Savvy real estate agents will take advantage of 1031 exchange properties which allows you to avoid capital gains tax on real estate investments. Normally, taxes will exceed 20-30% of capital gains, but if the proceeds are reinvested in accordance with the rules in IRC 1031, you can avoid these taxes.
Get Involved With The Real Estate Community
Real estate investment groups can be a great way to meet like-minded individuals, get insightful advice and learn more about property investment. The internet has made it easier than ever to join these communities, and the support that you receive at these groups can be invaluable going forward. Additionally, you should also make an effort to stay afloat on the latest movements in your particular market - this could include interest rates, rent prices, income, etc.
Having an emergency fund is always a good idea when investing, but particularly in real estate because there are many unforeseen expenses that can occur, especially if you own multiple properties. Make sure that these will not blindside you by tucking away money each month into a rainy day fund.
These are key factors to keep in mind when entering the real estate market. Property investments can be highly rewarding and lucrative, but it is also a challenging market and one which requires hard work, patience, and commitment. This can make it daunting to get started, but there is a lot of helpful advice and friendly communities that can make it easier and put you on the path to success.