Property investment has always been associated with multimillionaires and business tycoons, but that is not to say ordinary investors cannot thrive in it. In fact, many wealthy people are millionaires because they are in real estate. You can make it too; All you need is a good strategy and proper understanding of the industry’s dynamics, and you are ready to go! Read on for six basic tips to help you get in the top bracket of property investment.
1. Take advantage of Deferred 1031 exchanges
For years, 1031 exchanges have provided an easy way for property investors to postpone paying taxes following the sale of a property. They work by transferring the tax obligation for a specific property to a second property of “like-kind” that the investor purchases immediately after selling the initial property. For example, upon selling a property for $500,000, you are likely to remain with less than $400,000 after taxes. 1031 exchanges help you use all the money to purchase another property and only pay taxes after selling it. If you have chosen to use the 1031 exchange, consider using approved vehicles for 1031 exchanges such as Delaware Statutory Trusts. They help to eliminate the stress of managing the property as well as simplify tax reporting obligations.
2. Prioritize location
The location has the bulk of the sway when it comes to real estate prices, and since property cannot be moved from one place to another, you have to ensure you spend your money on strategically situated buildings. Things to look at when determining the suitability of a location include proximity to public transport and social amenities. Check the condition of the neighborhood, too. Are there schools, universities, and offices in the vicinity?
If your plan is to sell the property in the future, check if the neighborhood has the potential of growing. New malls, apartment buildings, and colleges are all indicators of growth.
3. Partner with a reliable real estate agent
The work of a real estate agent in property investment is to take some of the workloads off the investor’s shoulders. They bring professional know-how to the table and save you the hassle of looking for contacts.
A real estate agent is likely to rent out or sell a property much faster than you would since they work directly with individuals on both ends of real estate transactions. Just ensure the individual or agency you work with understands your needs and has a good track record.
4. Don’t enter into any contract without legal counsel
Many people still play into the hands of deceptive agents and investors by signing contracts without seeking independent legal advice. Real estate attorneys know the laws and paperwork involved in real estate transactions like the back of their hands. They can easily point out concerns or clauses that you should know about before signing any papers. It may look like an unnecessary expense, but it can save you from tying yourself in costly contracts.
5. Do your research
Success in property investment is partly dictated by how deep you go in your research, as tiny oversights can prove costly during property resale. There are several online resources that can give you a nodding acquaintance with the history of a property you are eyeing and provide you with alternatives. Always check stats such as the median price of properties in a certain area and whether it has been rising or falling. Check how the neighborhood has performed in times of crisis and whether the population and number of homes are rising or falling.
6. Proper market timing
In real estate, timing separates the great from the good. Shocks or dips to real estate valuation happen all the time, and while the good property will certainly bounce back, you can only benefit from the fluctuation if you keep the property for a longer period. Proper market timing will expedite your way to a sizable equity cushion, which basically translates to a better chance of continuity in case of an unexpected turn of events. It also yields flexibility and freedom and gives you the chance to capitalize on promising high-priced investments.
Any industry looks intimidating until you deep your toes into its waters. If you want to get into real estate, don’t be moved by those huge terms you see in journals. You don’t have to be an expert to excel. All you need to do is ease yourself into the trade and carry the right tools with you. Hopefully, the above tips give you a place to start as you set yourself up as an investor.