Are you looking for a way to diversify your Investments? If so, you should consider investing in real estate. There are a lot of people who believe that investing in real estate is only something for the wealthy, and they may believe that it is simply too hard to get into. In reality, that is not the case. There are a lot of misconceptions that people have about investing in real estate, but there are also some important facts that people need to keep in mind.
If you are interested in exploring real estate investment opportunities, what are a few of the most important points you should know?
1. FACT: Investing in Real Estate Can Help You Protect Yourself Against Inflation
You have probably heard that inflation is a significant issue right now. You may even feel like your money doesn’t go as far as when you go to the grocery store. If you are looking for a way to hedge your risk against inflation, investing in real estate could be one of the best ways to do so.
There are a lot of traditional Investments that tend to struggle when inflation goes up because people are concerned that their money may not go as far. On the other hand, real estate tends to do well during times of high inflation. When inflation rates go up, the value of your property can also go up, helping you generate more rental income. Therefore, investing in real estate could be a significant inflationary hedge.
2. FICTION: It Is Not The Right Time To Invest
If you wait for the perfect time to get involved in real estate, you will be waiting forever. You might be waiting for mortgage rates to drop, which could make your mortgage more affordable. On the other hand, if you wait this long, you’ll be competing against a lot of other people who are also trying to take advantage of lower mortgage rates. If you decide to purchase property when mortgage rates are high, you might have less competition; however, you might not like how much money you have to pay for your mortgage.
Instead of focusing on the market, you need to focus on your individual circumstances. If you decide to take out a mortgage when the rates are high, keep in mind that you can always refinance later. It is more important for you to research the local market instead of focusing on what the financial markets are doing. That way, you can find the right property to meet your needs.
3. FACT: There Are a Lot of Tax Benefits That Come From Investing in Real Estate
Nobody should have to pay more money in taxes than they are required to by law, and you may be able to save money on taxes by investing in real estate. Before you start claiming a lot of tax deductions and credits, it is critical for you to work with an accountant who specializes in this area; however, if you decide to rent out your property, you will effectively be running your own business. Business expenses are typically tax-deductible, so your expenses tied to the property could also be tax-deductible.
For example, the interest on your mortgage could be tax deductible, and your maintenance expenses could also be tax-deductible. If you hire a property management company to manage the property for you, the amount of money they charge you could also be tax-deductible. Even the money you pay your accountant to do your taxes might be tax-deductible. Of course, you could talk to the accountant before you start claiming these deductions.
4. FICTION: Investing in Real Estate Is Too Volatile a Market
It is true that the value of a property could drop over time; however, when compared to the stock market, the real estate market is significantly more stable. Furthermore, if you purchase real estate, you should be generating income every month in the form of rental income. Therefore, investing in real estate, while it has its risks, may be significantly less risky when compared to the stock market.
5. FACT: Location Matters for Your Rental Property
You may have heard that the three most important factors in real estate are location, location, and location. That is true regardless of whether you are purchasing a primary home or a rental property. Therefore, you have to think carefully when you are trying to decide where to buy your rental property.
Of course, you need to find someone who can pay rent, and that means you need to purchase a property in an area where a lot of people want to live. If you are purchasing a rental property in your local area, you may have a pretty good idea of what areas are going to grow in the near future. If you are purchasing a rental property in a different location, you need to work with someone who is familiar with the area. You should consider average rental rates, amenities, public transportation, the school system, and crime rates.
6. FICTION: Being a Landlord Is Too Difficult for Me
When you think about investing in real estate, the idea of becoming a landlord may not be very attractive to you. Some people assume that it is incredibly time-consuming, and other people don’t want the responsibility.
It is true that you will have some responsibilities as a landlord. You need to locate renters for your property, you will need to handle ongoing maintenance, and you must make sure your residents pay rent on time. You may also have to deal with emergency repairs from time to time.
You might be able to do this on your own, but you are under no obligation to do so. If you don’t want to be a landlord, you can hire a property management company to handle all of this for you.
7. FACT: Your Real Estate Investment Could Pay for Itself
When you are trying to figure out how much rent to charge, you need to make sure that you cover all of your overhead expenses. This means that your real estate investment could end up paying for itself. It is true that there are some overhead expenses you will have to cover if you decide to purchase real estate. This includes your mortgage, your home insurance, taxes, utilities, and maintenance expenses.
Fortunately, you should have someone renting out your property, and the money you collect from them in rent should be enough to cover these expenses. You might even have enough money left over, which could serve as profit. If you are trying to figure out how much rent you should charge, a good rule of thumb is to charge one percent of the value of the property per month in rent. You might even want to reach out to a property management company that can help you.
8. FICTION: You Have To Be Super Wealthy
When people take a look at the price tags on houses, they immediately assume that they have to be super wealthy to purchase a rental property. In reality, that is not necessarily the case. Remember that you don’t have to purchase a rental property with cash. You are always welcome to get a mortgage if you want to buy a rental property. Then, you can use the income you collect in rent to cover the mortgage. Instead of assuming that rental properties might be out of your price range, take a look at some of the sale prices of rental properties in your area.
9. FACT: Investing in Real Estate Could Be the Foundation of Your Retirement
There are lots of people who are looking for ways to save for retirement, and investing in real estate could be a strong option. You have probably heard that it is important for you to diversify your investments, and investing in real estate could be a way to do so. If you select a good property, the value should rise over time. Then, when you are ready to retire, you may be able to sell the property for a significant profit, allowing you to fund your retirement. Or, you may decide to hang onto the property, using the income to support your lifestyle during retirement.
Work With Barrett Financial Group for All of Your Real Estate Investment Needs
If you are looking for someone who can help you finance the purchase of a rental property, we can help you. We are Barrett Financial Group, and we are hard money lenders in Arizona. We understand that you might be interested in purchasing a rental property, but you might also need help finding a real estate loan. We have plenty of options available, and we can customize the terms of your loan to meet your needs. Contact us today to speak to a member of our team, and let us help you take advantage of all of the benefits that come from investing in real estate.