Consider yourself an investor in real estate, if that is something you are interested in, then read on to learn about the benefits of real estate investing by following the steps in this guide!
Have you ever noticed how the wealthy seem to make amassing wealth appear to be simple? Do you anticipate being able to retire comfortably when the time comes? Perhaps more importantly, are you aware that you should invest but are unsure where to start? If the answer is YES to all of the above questions, continue reading as there’s a fair chance you make one of the most serious decisions of your life.
Today’s financial world is as fascinating as it is overwhelming. However, with the right knowledge, investing may be one of the most profitable ventures you undertake. Real estate investment, in particular, has repeatedly shown that it can act as a wealth-building platform for astute investors. CT Homes’ partners have flipped hundreds of assets in every business condition, demonstrating unequivocally that real estate is a viable investment technique.
There are many real estate investing options out there, and this guide will explain the benefits in great detail, along with why we believe real estate is the best choice.
6 Undeniable Benefits of Real Estate Investing
For good purposes, investing in real estate is a common career path. Real estate investments require commitment and planning, but when done correctly, they have a plethora of advantages over other career opportunities. Continue reading to learn about the advantages of real estate investors that make it such an appealing career.
Taxes are one of the most expensive costs for anyone, let alone a real estate investment firm. There are, however, ways to offset the loss of revenue in taxation by real estate. Tax breaks are available for rental homes, hotels, vacant land, commercial buildings, industrial, shopping malls, and warehouses.
Flow of Cash
Cash flow is simply profit, which is perhaps everyone’s favorite advantage. Cash flow is the amount of money left over after you pay your rent, mortgage, taxes, insurance, and any maintenance. Real estate is one of the most effective ways for investors to produce cash flow. The monthly income generated by rental properties will help investors cover their expenses and put money back in their pockets. Over time, the initial investment is repaid, and a good return is realized. Cash flow is arguably the most significant advantage of investing in real estate.
Inflation is characterized as a rise in the general level of prices for goods and services that continues over time. In other words, it allows each dollar you own to purchase a smaller proportion of a good or service over time. Stocks, for example, have become more expensive to buy as inflation has risen. In essence, inflation prevents money from traveling as far as it should. Real estate, on the other hand, acts as an inflation hedge. Real estate, unlike almost any other form of investment, responds proportionally to inflation. Rents and home prices rise in tandem with inflation.
Funds with Leverage
When buying a home, you have the option of using leverage. It is entirely possible to buy a $500,000 home for $100,000. You are not even required to use your own money. Stocks, on the other hand, necessitate a full investment upfront. Leveraging capital also helps you to start more than one real estate deal at the same time because your funds aren’t all tied up in one project.
If you borrow money to complete a real estate transaction, you must repay it with interest. However, each payment brings you one step closer to paying off your principal. You are accumulating both equity and wealth in the same house.
Real estate is widely regarded as a great investment tool due to its potential to appreciate value over time. This method, known as appreciation, allows real estate owners to buy and sell assets for a profit. Property appreciation is another advantage of owning rental properties. Not only will the value of your home increase with time, but rental rates will usually rise as well. As a result, real estate is a lucrative long-term investment.
Benefits of Real Estate Investing: The Top Three Ways to Invest
The following are the three most popular ways to invest in real estate:
- Purchase and Keep
- Buy in bulk
Buy and hold
With the worst of the recession behind us, markets have seen record gains in the last three years. Home prices have risen by over 28% in the last 36 months. Buying low no longer has the same meaning, and investors have noticed the shift. The spreads that wholesalers and rehabbers have become accustomed to recall 2006’s record-high prices.
While there are still many opportunities in the world of real estate flipping, a new king has emerged: rental properties. Rentable assets are bought to rent. Homes that are bought and held benefit from current appreciation rates and are more expensive than homes that were bought and held only a few years ago.
Simple buy-and-hold exit strategy means that investors would look to increase their profits by renting out the property or simply holding it until it can be sold for a profit. Holding onto a property serves two purposes. They reduce debt while increasing equity. Of course, the tenant pays for it all. With cities like San Diego and Miami prone to price inflation, the idea of a tenant paying off the mortgage is very appealing.
Buying and holding assets earn less than rehab or wholesale. Long-term passive capital prospects abound. Well-managed rental property yields are much more than a quick flip. Doubtful? See what some New York investors are doing.
Some call NYC apartments the “new gold.” Condos in The City That Never Sleeps are proving to be a great place for wealthy investors to store and grow wealth. Apartments in Manhattan have risen faster than gold and stocks. In the words of Larry Fink, founder of BlackRock Inc., “the two biggest stores of wealth globally today are contemporary art….. and I don’t mean that as a joke, I mean it as a significant asset class. And, two, apartments in Manhattan are today’s other store of wealth.”
Even though holding property costs more than holding gold, owning or renting property has significant tax advantages. Another reason why buying and holding properties is so popular now.
Historical appreciation rates have pushed up house prices while reducing investor spreads. There is also no denying the lack of investor interest as a result of home price appreciation. Flips accounted for 4% of home sales in the first quarter of this year, according to RealtyTrac. For that keeping score, that’s 17,309 flips, the fewest since the middle of 2011. However, this does not rule out the possibility of profiting from a rehab initiative. In reality, investors are making more money than ever before.
Real estate investors made around $61,684 per flip just over a year ago. However, things changed rapidly over the year. During the first quarter of 2015, the total gross profit on a flip increased to $72,450.
“The strong returns for home flippers in the first quarter show that there is still a demand in this recovering real estate market for move-in-ready homes rehabbed to more modern tastes, particularly given the scarcity of new homes being built,” said Daren Blomquist, vice president at RealtyTrac.
There is no doubt that rehabbing remains a significant factor in today’s real estate market. It is simply a matter of exercising caution and capitalizing on opportunities that arise. There is a lot to be said about designing a method. In reality, when it comes to rehabbing a house, our partners at CT Homes have their own system:
- Development of Work Scope
- Job Bidding and Contractor Selection
- Contract Communication at the Time of Signing
- Six Critical Documents
- Managing the Rehabilitation Process
- Property Closing
- Getting Ready to Sell
Buy in bulk
Real estate investing allows for a range of exit strategies and methods, but none may be more suited to the “green” investor than wholesaling. This technique is less risky and has lower upfront costs than the previous strategies mentioned. However, wholesale profit margins are lower than in other methods.
A wholesale transaction is built on the concept of an intermediary acting as a middleman between a seller and an end-buyer. That being said, it is the investor’s responsibility to obtain the rights to a specific property and sell their contract to the buyer. An investor can wholesale in two ways: they can sell or “assign” their purchasing contract to an end buyer, or they can close on the property and then resell it to another investor in the form of a “double close.”
A traditional wholesale transaction does not necessitate the investor owning the land. The object is to acquire the right to purchase the property – a binding contract if you will. With the contract in hand, the wholesaler sells their property rights for an “assignment fee.”
Real estate investments have the potential to open up a plethora of opportunities for those willing to put in the effort. The passive income generated by each investment enables effective investors to monitor their time and live the lifestyle they desire. Take the time to study the real estate investment strategies available to you in order to make the best-informed decision. Remember, the benefits of real estate investing are just as impressive as the ability allows them to be.