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Should I Invest in Real Estate? 3 Reasons You Should Consider It

Making any investment can be a little nerve-racking. You are putting your hard earned money into another’s hands, and hoping for the best. Sure, there are things you can do to hedge your bets, but still, you’re at the mercy of the market, and your investment could be profitable, or it could fail miserably.

Even though real estate investments can be just as unstable as other investment types, it is still a popular investment choice for those looking for a way to grow their assets without messing with the stock market. While many people feel nervous about the lending circumstances that led to the market crash in 2008, there are still great reasons to invest in real estate. Here are three big ones.

Money, Money, Money

Obviously, this is the biggest reason to make any investment, right? Well, in real estate, the money comes in a little differently. For example, if you were to buy a property which you then rented out, you would have a monthly influx of cash from the rental payments, as well as the potential long-term increase that would come from the appreciation of the property. If appreciation works in your favor, you may be able to build substantial equity in the property, which could lead to payout should you ever choose to sell.

Alternatively, you might choose to purchase a “fixer-upper” home for a low price, renovate it, and sell it quickly at a higher price—otherwise known as “flipping.” If you have the right connections to help you get your repairs done quickly and affordably, this could be a great way to make cash quickly.

More Control, More Freedom

Unless you want to get very technical in your stock market knowledge, chances are that any stock investments you make will be managed by someone else. This requires you to give up control over your investment. Alternatively, with real estate, you can still be in close control over your investment decisions and purchases. Of course, that doesn’t mean you can’t get help (i.e. from a property management company), because you definitely can. But even then, you are more in direct control over your investments than you might be in you invested in something else.

Additionally, successful investments can bring you financial freedom. Many people dream of being able to break free of the 9-5 office job, and smart real estate investments could help you do just that. You also have some measure of freedom when it comes to what kinds of real estate you invest in; that is, you can try a couple things until you find just the right option for you.

Taxes

Real estate creates many scenarios that work in your favor when it comes to taxes. Depreciation, for example, which basically happens automatically based on aging properties and fixtures, can result in a net loss on the property for the year, which creates a tax benefit. Also, if you plan on purchasing multiple properties, doing a 1031 exchange allows you to use the cash you gain from the sale of one property towards the down payment on another property, without having the money be taxed as income. There are certain guidelines that must be followed in order to use this benefit, but it can really come in handy when trying to grow your investments.

These are just a couple specific examples, but you may have more benefits coming to you if you pay for mortgage insurance, or if you use the residence as your primary residence for a specified period of time. These benefits should all be discussed in detail with a tax professional, but in the end, it adds up to real estate being an investment strategy that lets you grow your assets, tax-deferred.

There’s no such thing as a sure thing when it comes to investments, but if you’re smart about it, investing in real estate could end up being very profitable for you. If you’re considering real estate investment, or you’d like more help managing your investment properties, contact Real Property Management online, or give us a call at 480-719-1243. We’d love to help you make the most of your investment!

APM 2016 Visitors’ Choice Award

We are pleased to announce that Real Property Management East Valley has received the APM 2016 Visitors’ Choice Award. This award indicates that RPM East Valley was one of the most frequently selected property management companies, selected by the millions of visitors AllPropertyManagement.com received in 2016. The Visitors’ Choice Award was created to bring attention to the best property and association management companies in the industry. These companies have each differentiated themselves from the competition with outstanding customer service and returns on investment for their clients–many of them for several years running.

If you’re a homeowner looking for a renowned property management company to take your goals to the next level (and to clear some space in your schedule), this list is the perfect place to start your search. For more information and a list of winners in other regions, click here.

To Flip or To Rent?

If you’re thinking about investing in real estate you have probably already thought a bit about whether to flip properties, or rent them out. Investing in real estate can be a very profitable venture, bringing you more predictable returns than the stock market while also building equity in the property. Flipping and renting can both bring you these benefits, but they are different strategies that involve different tactics, and you should think carefully before jumping into either one.

Here are some questions you should ask yourself when deciding if you should flip a property, or hold on to it and rent it out.

Are you looking for quick cash, or a long-term, steady income?

If you’re looking to make a large amount of cash quickly, then flipping a home might be your best bet. When you purchase a home to flip, you’ll probably purchase one that isn’t in great shape and needs a lot of repairs or updates, which means that, most likely, you’ll get a great price on the property. As long as you manage your spending while fixing it up, you’ll probably be able to sell it for a much higher price than you purchased for, making a good amount of money on a single sale.

On the other hand, renting out a home may cost you a little more up front, since you’ll have to purchase a property that is in livable condition (or very close to it). However, renting will provide you a steady source of income for an extended period of time. Ideally, the property value will increase as well, which means that your equity will also increase.

How much time do you have?

Both flipping and renting require investments of your time and money in order to be successful. Flipping a house will keep you very busy for several weeks or months. Besides finding and purchasing the property, you’ll have to manage the home improvements and repairs, to make sure everything stays on time and on budget. You’ll also have to put some work into selling the property when you’re ready.

Renting will take some time and effort as well. You’ll have to market and show your house to potential renters, perform any necessary repairs or maintenance, and be available to handle any problems that arise when your tenants need you.

If you’re looking for a more hand-off experience, consider using a property management company to help you with these hassles.

What do the numbers say?

Ultimately, your goal is to make as much money as possible, right? If you have a specific property in mind, and you are trying to decide how to use it, run some numbers to help you out. How much could you buy it for? What are comparable homes selling for in the area? How long might it take you to find renters? How long would you plan on holding on to the property before selling, and what will the housing market do in that time? Knowing these numbers will help you greatly as you decide whether to flip or rent. If you’re unsure how to find the answers to these questions, talk to a realtor, or better yet, a property management company, for a better perspective.

Flipping and renting can both be profitable ventures, if you know what you’re doing. Decide what your end goal is, run a few numbers, and get ready to reap the benefits of real estate investment.

Want a great property management company to help you market and manage your investment properties? Contact Real Property Management at 480-719-1243 to discuss your options. We’d love to help you make your investment profitable!