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February 11th, 2018 by Marco Santarelli
What is residential real estate investing?
Residential real estate investing is more than just buying a home or looking for an investment property. Do you think it is easy to predict success in the residential real estate world, where circumstances keep fluctuating every now and then? To some extent, the possible hindrances can be controlled with a set of ground rules which you need to implement on your next residential real estate investing deal.
Let’s go through the two main guidelines which are inevitable if you wish to succeed in residential real estate investing.
Fetch for a favorable market
If you are a seasoned real estate investor, you will definitely have importance for a healthy market environment, but if you are a newer investor, you will need to shed some light on this factor. It can go even worse if you have purchased a property with adjustable rate mortgage because sometimes the interest rates keep rising and you will end up paying more even if you can’t afford it. Such situations alleviate the demand for the entire real estate market in particular locations.
Always be particular about the location
If you find a location with falling interest rates, manageable GDP growth, and good employment rates, then you can start looking for a smart property to invest. Analyze and research the location before investing in any residential real estate property.
Why is location important in residential real estate investing?
Location is an inevitable factor in the residential real estate investing business it is further linked to various factors like employment opportunities, population, and affordability (which determines profit). Below listed are few locations which will justify this statement and further motivate you to look out for the best location to invest in residential real estate.
Click on the link if you are interested in knowing about Houston Real Estate Market.
To read about Dallas Real Estate Market, click on the link.
For an in depth review of Atlanta Real Estate Market, click on the link.
If you are interested in buying Birmingham Investment Properties, click on the link.
What kind of residential real estate investing should you go for?
Well, the desired investment is found in an ideal city which is expanding in many different factors related to the real estate market. If after proper analysis, you find the market conditions look vague, it is recommended to play safe by sticking to a particular location which is familiar to you.
Should you fix and flip?
Fix and flip is a great choice if you have been in the business for a long time, or consider consulting a real estate investment adviser to get proper guidance. You need to cherry pick the best deals from real estate auctions, hire contractors to rehab the properties, and sell them for top dollar to an investor. Rehabbing a property adds value to it. When you buy a property to fix and flip, the increase in its value is significant and you can profit by selling it immediately. Renovating the property will reap you great profit (when you sell it). Most investors don’t have the ability or time to take every necessary step an accomplished fix and flipper can, and will happily pay more to get a property that doesn’t require rehab.
Should you buy a single family rental property?
Yes, you should go for a single family rental home it if you are looking for a small and affordable investment. It is easy to exit, unlike a multi-family rental property which will make you think twice due to heavy investment. Managing a rental property is quite simple if you hire an efficient property management team around the city. They not only maintain your property but also help you in finding the best-suited tenant who are vetted and would less likely default on timely rent payment.
What are the tax benefits in residential real estate investing?
Property taxes do affect profit but it highly depends on whether you are a professional or a passive investor. If you are a professional investor, your losses are fully deductible against all income; otherwise, it is only deductible up to $25000 against your rental income. This incurred loss which exceeds $25000, can be carried forward to the following year.
Operating expenses such as mortgage interest, property management fees, property taxes and repair & maintenance can all be claimed as deductions against rental income.
Real estate profits are not taxed until you sell the property. For example, if you purchase a home for $150,000 and it appreciates to $200,000, the $50,000 gain is protected from taxes until you sell the property.
Rental property owners may assume that anything they do on their property is a deducible expense, but that is not true according to the IRS. Money you receive for rent is generally considered taxable in the year you receive it, not when it was due or earned; therefore, you must include advance payments as income.
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