This article will give you three simple guidelines that must be followed if you are to succeed at real estate investing.
Acknowledge the Basics
In real estate investing, there is acquisition and holding and selling of rights in real property. Real estate investments boast of more advantages than stock investments. What I mean to suggest is that with an investment in real estate, you can use other people’s money to magnify your rate of return and control a larger investment. Besides, yields from annual after-tax cash flows, equity build-up through appreciation of the asset and cash flow after tax upon sale are some of the other benefits. Furthermore, you can look forward to non-monetary returns such as pride of ownership, the security that you control ownership and portfolio diversification.
On the other hand, real estate investment is risky. It requires capital, nonetheless it is a source of wealth.
Understand the Elements of Return
1. Cash Flow – Keep in mind that the numbers you rely on later are not only truthful but also correct.
2. Appreciation – This refers to the growth in value of a property with time. In other words, it is the future selling price minus the original purchase price.
3. Loan Amortization – This can be defined as the periodic reduction of the loan over time which leads to an increase in equity.
4. Tax Shelter – Tax shelter causes a reduction in annual or ultimate income taxes.
Do Your Homework
1. Forming the correct attitude goes a long way. Investing in rental properties is not like buying a home, so try and develop the attitude that real estate investing is business.
2. Developing a real estate investment goal with meaningful objectives is the key. Answer questions such as: What is it that you want to achieve? By what time do you want to achieve it? How much cash will you be able to part with comfortably? What rate of return is expected?
3. Research your market for understanding as much as possible about the conditions of the real estate market surrounding the rental property you wish to purchase is inevitable. Learning about property values and rents and occupancy rates in your local area is a prudent approach when it comes to real estate investing. Also, seek help from a qualified real estate professional or county tax assessor.
4. Learn the terms as well as returns along with how to compute them. Moreover, get familiar with the various nuances of real estate investing. Strive to learn the terms, formulas and calculations. Check out sites online for free information.
5. You can invest in real estate investing software too. Create your own rental property analysis so that you gain more control about how the cash flow numbers are presented. Furthermore, you understand better about a property’s profitability.
6. A real estate professional knows the local real estate market and understands rental property, as such he is of use. Good luck!