Have you ever dreamed of owning that amazing beach front vacation property? The perfect get-away home we always see on TV. Sure, you could make some money on the home while you are not using it. But what about getting serious with investment properties now, so you can buy your own vacation home in the future. Listed below are some of reasons why people chose to put their money in real estate. Is it right for you?
Reasons to Invest in Investment Properties:
The basic logic behind investing in real estate is buying a second property, renting it out for income. Then using that income to pay the mortgage while trying to take home a little profit each month. Then once the house is paid off, that second income is profit back to you!. From there ( if you want another home) you can repeat the process and use the income of the combined properties( you own two now) to pay off the second. See the pattern? Sounds easy right? The stock market in theory is easy as well. Just put in some money and watch it grow! The reality is, anything you invest has a risk. Real estate is investment that comes with a risk just like many other methods of investing your money.
Realtor.com says to consider this strategy:
Buy a property, fix it up at minimal cost, and then cash in by renting it out at a rental fee higher than what you pay on the monthly mortgage. This type of real estate opportunity suits young business people and professionals who have income to invest but who can’t afford to wait years for a return on their investment and who are not planning for a long-term second home.
Many serious residential investors purchase more than two properties, becoming mini-rental moguls. The purchased property is usually close to the owner’s residence, which makes it easier to respond to any property management issues that arise. To maximize income-producing investment, purchase property in an area short on rental homes. By short, we mean anywhere where the market is so hot that rentals don’t stay vacant for long. University towns, neighborhoods in good school districts, up-and-coming urban neighborhoods on the fringe of boom areas are all good options for this kind of investment.
Buying investment properties can be a lucrative, but it is also is very cash intensive compared to other methods of investing. Traditional investments have historical data that can be researched at any time. I am not saying that history leads to future results, but buying real estate is much harder to quantify in that regard.
With the right property, finances, and location, investing in real estate can be a very solid investment. The large payout at the end is what really attracts people, or the monthly income it can bring in if you are renting the space out.
Typically, real estate is a safe play with inflation. As many of you know, rental rates and home prices increase with inflation but your mortgage price is going to stay the same.
Success is in your hands
Don’t we all wish investing was this simple? this is not a guarantee, but the chance of success is can be increased the more time you have to spend with it. People love this because they can see the reward for time they put in. Being a landlord is a commitment and is not for everyone. Property management, repairs, bad tenants, and everything in between will probably keep you busy. Yes, you can hire a property manager, but the cost of that could eliminate all your profits based on the size of your investment.
In the early years of paying off your loan, the majority of the money is going to the interest. If you receive rental income from the rental of a dwelling unit, there are certain rental expenses you may deduct on your tax return. These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs¹.
Experience / Control
One of the downsides to a traditional investment like stocks is once you invest in a company, you are stuck with them and hope it they do well. With real estate, you can at least control most of the aspects your investment. Making repairs and changes to rental properties are all under your control and can be done when you decide.
Stocks can be a hard thing to invest in for someone with little or no experience in that area. Real Estate might prove to be more friendly to a new investor. Stocks require constant monitoring and management to stay up with the latest trends. Real estate is by no means “set and forget” but the barriers of entry seem to be less intimidating.
Perhaps one of the biggest advantages in investing in real estate is the potential payout at the end. Multiple options will present themselves. You can sell the house altogether and add the money to your retirement. Or, usually by the time you have retired, the house (or houses) you own will be payed off and you are generating monthly income from it.
Remember: Real estate is a small business, not just an investment you can “set and forget”