Real estate investment is a great way to create wealth for your future and also to earn an attractive passive income each year. Once you have made up your mind to take the plunge, you will notice that there is a lot you need to learn to become a master in this field. It might be advisable to get yourself a mentor or read a few books to learn the tricks of real estate investment before trying by yourself. Here are some very basic tips to keep in mind when investing in real estate.
Location is of a Crucial Importance
In the world of real estate, location is everything. Before deciding in favor of buying a property, analyze the local markets to make sure that its location is good. This is because you arrange the money and go under debt for buying a property. It only makes sense to buy a property that remains in demand and also sells quickly when you want to reach the equity built in it after a many years of time. Even the worst property in the best location sells at a premium but a good property in a poor location often fails to attract motivated buyers.
You Stand to Receive Tax Benefits
The government actually wants real estate investors to provide housing for other people to solve the housing problem in the country. This is the reason government offers support to real estate investors in the form of tax benefits. One of the most significant of these benefits comes to you in the shape of depreciation. When you buy a property, you can claim tax deduction by writing off depreciation of the building, not the land though. As a real estate investor, you also get benefits like deductions on mortgage interest and maintenance expenses.
Credit Report is Important
Not many investors can work with their own money all the time. You will probably need to borrow money from banks to buy investment properties. This means that you must keep your credit report in a good condition to get the approval for loans from the banks. Get mistakes removed from the report and work on improving the score if it is right on the border line or below it.
The 1% Rule or Rental Investments
To earn money from your investment properties, you will have to rent them out. The 1% rule is a quick way how to judge if a particular rental property can be a good investment. It says that you should look for properties that rent monthly for more than 1% of its market value. So if the property is worth $200,000, the monthly rent should be $2000 or more to be considered at least acceptable investment.
Real Estate Evaluation and Analysis Tools
There is no harm in using modern real estate software to evaluate a property before deciding in favor of buying it. You some conservative investors prefer to use local newspaper to find properties and then calculate returns on a paper using their calculators. Some investors use excel spreadsheets, but if you like modern technologies, you can benefit greatly from using automated tools for searching and analyzing real estate deals. There are many free tools for you to use and making a mistake in your calculations at home can cost you thousands of dollars. We recommend the following tools for your real estate analysis:
Realtor.com - find properties for rent in your city
Zillow.com - search potential investment properties in an area, check their purchase price and rent
Zilculator.com - evaluate your investment property in 2 minutes, generate thorough reports for your lender