Real estate investments are one of the most promising avenues for investors to generate long-term returns. There is, however, a lot to learn in this area, especially if you are just getting started with real estate investments. Investing your money in real estate is more complicated than investing in stocks, as it requires extensive legal and financial due diligence. Although the investment consultants at FIG Tree Capital Ventures can help protect you from possible shortcomings, let’s look at five tips to take into consideration before you get started.
1. Plan All Elements
Investing in real estate is like any other investment that requires comprehensive planning. As an investor, you must look beyond returns, and consider all other factors associated with any proposed real estate investments. Think about your investment goals and outline the steps you will take and their expected gestation time. Make sure your investment consultant has a backup plan, in case things move south. Set financial goals and prioritize “cash flow” instead of “appreciation”. That’s because cash flow is more predictable than appreciation.
2. Proceed with Caution
Real estate investments can be highly profitable, but also involve certain risks that you must consider before signing on the dotted line. The best way is to take everything one step at a time. Avoid investing in only one location; if the area is prone to negative economic factors, the decision may do more harm than good. Exercise due diligence, be it on the property, its cost, or the market conditions, and always have an exit strategy in place.
3. Evaluate Tax Benefits
The IRS requires real estate investors to pay certain taxes on the income they earn from their investments. Qualified investors, however, can defer or avoid certain taxes. You can, for instance, use the annual depreciation allowance provided by the IRS to reduce tax bills. Similarly, you can benefit from 1031 Exchanges to sell a property, use its equity to purchase another property, and defer your tax payments. If you have secured a loan to fund a real estate purchase, refinancing is another way to get an extension.
4. Use the One Percent Rule
Owning a piece of property entails a number of expenditures including insurance, maintenance, homeowners association fee, and taxes. The One Percent rule helps investors determine whether investing in a property would be worthwhile, if they rent it out after acquisition. The rule says, any piece of rented property must generate at least 1 percent of the total cost of acquisition. If, for instance, a property costs $200,000, it must generate a monthly rental of at least $2,000, for it to be a sensible investment proposition.
5. Hire an Investment Expert
Whether you are investing in real estate for the first time or have walked the line before, having an expert will surely make the journey a whole lot easier. A real estate investment group such as FIG Tree Capital Ventures helps you define realistic goals while leveraging a blend of proven and progressive capital management strategies. We provide a comprehensive consultation to make sure you always have an accurate overview of the potential cash flow with your investment strategy.
Let FIG Tree Guide the Way
Real estate investments represent one of the most cost-effective and stable ways to multiply wealth and diversify your portfolio. As a real estate investor, you need to study the existing market conditions and evaluate all possible risks before putting your money down. FIG Tree Capital Ventures, a trusted real estate investment group, has a team of experts to help you invest in the right properties and reap long-term returns. Speak with one of our real estate investment experts for a no-obligation consultation. Simply call 866-304-9194 or fill out our contact form.