Are you stepping into the exciting world of real estate investments for the very first time? If yes, there is surely a lot for you to learn. Buying and selling property, taking premises on lease, or investing in rented real estate is tricky business. The investments made in this field are far more complicated than those made in the currency, commodities or stock markets. Along with several financial and legal aspects of investments, there are extensive due diligence compliance requirements that have to be taken care of at each stage.
This is why, it becomes essential for you to give yourself a firm foundation before stepping ahead to invest in your very first real estate property. Here are some important fundamentals that you should familiarize yourself with at the earliest.
Location is important
Have you checked out the location of the property in which you wish to park your hard-earned money? Such investments may also incur a significant portion of debt and thus you would not like to end up with a deplorable property languishing at the end of your street. If your budget allows, you would rather invest in a good neighborhood with close proximity to your place of work, public amenities, schools, markets, hospitals, etc. If you are purchasing real estate for equity purposes, you may wish to invest in a low-grade property in a fabulous location, fix it up at minimal costs, and then sell off the same for good profits to another investor.
Wholesale properties are a good option
Just as in case of your investments in the stock market, it is a good idea to avoid offering the “full price” for buying the properties on the racks. Instead, it would be wise to go for so-called wholesale properties which may be available at a steep discount. You may want to run the numbers to assess if the rehab property you are interested in would be worthy of the final selling price. Experts opine that it may be a good idea to invest $20,000 in real estate property and escalate it by 100 percent to arrive at your final selling price. This is the reason why this kind of investment is considered as a lucrative option for investors looking towards optimal ROI.
Understanding tax benefits
There are significant tax benefits available for real estate investors. Of all the available benefits, the most important of them all happens to be depreciation write-off. So, when you choose to invest in a property including a building, you are allowed to waive off the permissible depreciation applicable on the building in the form of tax deduction. It is recommended that you get in touch with your tax consultant to get a deeper insight into the specifics.
All in all, your investments involving real estate would require you to delve deep into the funding and taxation issues before you decide to go for the plunge. For instance, a prior estimate of your credit report would help you gain extra mileage when it comes to chalking out your investment plans in real estate.