If you’re thinking of entering the real estate investment game, here are the answers to some commonly asked questions about how to become successful:
What does a good real estate investment look like?
A good real estate investment is a property that will bring you a profit at the end of the month after paying expenses, which include (but aren’t limited to) taxes, insurance, debt service, maintenance, and other unexpected costs. If you can find a property where the numbers work out that way for you, it’s a good investment.
What kind of financing is available?
You can still get into a duplex, triplex, or quadruplex with only 3% down if you’re going to be an owner-occupant (i.e., if you’re planning to live in one of the units yourself). For those just starting out in the investment game, this is an excellent way to go; it’s a good idea for beginners to stick with four or fewer units. If you get a property with five or more units, you’ll need commercial financing.
What are the tax advantages of real estate investing?
I’m no CPA, but I know from personal experience that owning and investing in real estate certainly does provide tax advantages. Some tax-friendly expenses include mortgage interest, property tax, operating expenses, depreciation, repairs, and professional services.
A more seasoned investor might add a piece of real estate to their investment portfolio, which is a great way to diversify. Real estate and the stock market tend to offset one another, so it’s a good idea to include an investment property among the stocks, bonds, mutual funds, money markets, etc., in your portfolio.
How can I pay off the property?
You’ll have to put money into this transaction at the beginning in the form of down payments, closing costs, and whatever you need to do to prepare it to rent. However, the renter will be paying you rent each month, so you’ll be paying off the mortgage over a number of years. This way, the renter is purchasing the property for you.
Does the property’s value increase over time?
It does! Value appreciation is the icing on the cake. According to the Minneapolis Association of Realtors, there was a 42% increase in property value between 2014 and 2018—that’s a good investment!
All these factors combined show that investing in real estate can be a great way to build your portfolio and overall wealth. If you have any questions about investing, don’t hesitate to reach out to me. I’d be happy to help you get started!