Real estate has long been viewed as a sound investment. Benefits of Investing in real estateare directly related to substantial increase in wealth of an individual. Wholesaling and buying a turnkey rental property are just a couple of the ways investors can benefit from real estate. The important benefits of investing in real estate are increase in property value due to appreciation as well as good cash flow in the form of rental income. Education and networking are very important to become successful in real estate investing.
Another advantage of investing in real estate is that there are many ways in which you can get a superior return on investment. Successful real estate investing is a multifaceted challenge. There are many things to look at in determining where, or even if, you want to invest in real estate. First of all, you need to consider what type of real estate suits your tastes and needs. Would you prefer residential, commercial, industrial, retail, or mixed-use real estate investments? You also need to consider the population growth of a given area, economic development potential, property values and trends, as well as a host of other factors.
What Are The Tax Benefits of Investing In Real Estate
The tax benefits of investingin real estate are that you have the advantage of deducting certain expenses every time you file your annual income tax. When you get rental income from the rental of a residence unit, there are some expenses you may deduct on your tax return. These expenses include mortgage interest, property tax, operating expenses, depreciation, and property repairs.
All expenses you incur to manage your investment property can be deducted from your tax. You can write off repairs immediately in the form of expenses.
The IRS considers conceivable wear-and-tear each building will need over time. It’s called depreciation of a property, and in case you’re an investor in turnkey rental properties, you can use this depreciation as a yearly tax deduction. For residential properties you can deduct the depreciating value of a property over the course of 27.5 years.
When you choose to sell your property, you are required to pay taxes for your capital gains. With the help of section 1031 of the Internal Revenue Code, you are permitted to postpone paying taxes when you reinvest those gains in another property. IRS considers that you are exchanging you old property for another real estate property. However, there is some criteria for 1031 Exchange. The new property must be of the same nature and its value should be equal to or greater than the old property. You must find the new property within 45 days of selling the old one and include it in the official documents, and you must close the deal in 180 days. With the 1031 Exchange, you cannot handle the money, nor transactions, on your own. You need an intermediary to do so, and this person cannot be anyone you’ve worked with in the past two years (e.g. real estate agent, broker, investment banker, lawyer, accountant, or employee). Failure to meet these criteria will disqualify you from the 1031 exchange and would hold you liable to pay taxes on your capital gains.
Primary Residence Exclusion
How to avoid capital gains taxes when selling your house? If you’re selling a house that has been your primary residence for at least two of the past five years, you can take full advantage of the IRS capital gain exclusion.
Capital gains from the sale of your primary personal residence are excluded from capital gains taxation up to $500,000 for married couples and $250,000 for single individuals. In order for the IRS to view the home as your primary residence, you should have owned it for five years and lived in it for at least two years. If the gains are greater than the above amounts, you can also invest that portion through a 1031 exchange described above and get a tax benefit. The IRS allows you to sell one investment and reinvest the proceeds without taxation. The swap must be a “like-kind” exchange.
Benefits of Using a Real Estate Agent
Your first investment property can be quite lucrative if you prepare adequately. Before starting in Real Estate Investment, do research all about the property and location a lot. Using a real estate agent can help you a lot in real estate investing. The benefit of using a real estate agent is that they have a formal education, years of experience and neighborhood knowledge. An agent will help in price negotiation, give you market conditions and forecasts.
What Does a Real Estate Agent Do For a Buyer
A real estate agent will help the buyer in finding the right property at a good price which is a critical factor to succeed in real estate investment. While hiring an agent you must find out how many transactions do they close a month/year. How much is the commission? (If you are a seller. Buyers aren’t charged commission.) How popular is their website and where do they usually get their leads? How long have they been a realtor/agent? It’s also very important to check if they can respond to your questions/requests within a reasonable amount of time. Another tip, look at different Realtors in your area and compare them. Most real estate agents stay in business because satisfied clients refer them to friends, family, neighbors and coworkers. Ask the people around you who they have used and ask them to describe their experiences with that real estate agent.
Real Estate vs Stocks – Which Will Make You Richer
The biggest advantage of real estate vs the stocks is thatthereal estate can safely be leveraged to increase your return on investment. For many people, investing in real estate is a very comfortable thing. They grew up with the idea of, “someday owning a home.” That is a familiar concept compared to buying stocks and bonds. When you own a piece of real estate property, you have something tangible, something you can look at, take your friends to see, and have the satisfaction of knowing that you own that piece of land or that building. It is very important psychologically to the investor.
By contrast, when people buy stocks, the intention is to hold them over a long period of time, investing the dividends along the way. Over the long haul, stocks can provide an excellent return, but along the way, they can experience some extreme fluctuations. The problem is that most investors are too emotional to just sit tight, so they do not execute their plan and they fail to realize their maximum benefits. Remember that calming effect of owning real estate.
Rental Property vs Stock Market
One noteworthy downside of real estate investing is preparing your income property before you rent it out, which defers the time when you can begin profiting from your real estate investment. All things considered, turnkey rental properties take out this issue as you can begin renting them out and generating rental income when you purchase them. In addition, you can hire a turnkey property management company, which means that you will no worries at all to manage your property, to collect rent or to address the complaints of your tenants. As soon as you buy a turnkey rental property, you can find tenants and start collecting rent from them, which is your rental income. As long as you are able to rent out your rental property for enough rent, you will have positive cash flow immediately. Turnkey rental property investing has really led to increase in the number of people turning from stocks to real estate in the US.
In looking at the financial aspects of owning a real estate, it is much more difficult to be defrauded with real estate than it is with stocks. Benefit of investing in real estate vs. stocks is that with real estate, you can physically go there, inspect it, walk around the land, and make repairs to the building. Your property management company is responsive for ensuring that your rental property remains occupied with qualified tenants so that the rental income flows without any hassles. With stocks, you have to trust in your company’s management. When you purchase a company’s stock, you’re looking for appreciation in the stock value, and perhaps annual dividend if the company pays it. With bonds, you’re looking for income yield on the interest rate paid by the bonds.
Benefits of Investing in Real Estate in 2019
For 2019, real estate market analysts agree that the outlook is very bright, particularly in certain markets. Different experts will give you different opinions on which market is the best, but most top ten lists have many of the same cities listed. For instance, a recent survey listed San Jose as its number one pick while another has Las Vegas at the top of its leader board. They have a lot of cash from the sale of those more expensive homes that they can spend in the Las Vegas real estate market. This 33-acre industrial site in the South Waterfront district is set for redevelopment. Plans include several parks, plazas, 2200 residential units and a waterfront by 2020. Nike is planning a 1.3 million square-foot expansion and there are other expansion products in the city. Other cities that made most analysts top ten residential real estate markets include Dallas, Nashville, Raleigh-Durham, and Salt Lake City. Each city has assets that make it attractive to new residents and new investors. Those assets add up to a very bright future for the real estate market in their specific area.
Benefits of Investing in Real Estate – Conclusion
When cities attract strong businesses with good-paying jobs, the employees that follow those companies and have substantial disposable will look to spend it somewhere. One thing is certain; they will need some form of residential real estate. This year is shaping up to be a very strong year for investors who are in the residential real estate market and there are many markets in the US to choose from.