There are some reasons why real estate remains one of the most popular investment vehicles. First, as the population increases, it keeps pushing up the demand for housing beyond the supply, which increases the cost of housing. Then, the value of real estate property in most places has been on a general upward trend over the past few decades and most importantly, it is a hedge against inflation, a quality that many other alternative investments do not have.
If you are considering investing in real estate, you have to carry out due diligence and fulfill all requirements so that the venture can be beneficial to you. Here are some basics that you should know about real estate investing.
Starting a real estate investment company
Most people begin real estate companies because of the notion that the industry is profitable. Most fail within a short period because they do not pay attention to all the legal requirements for starting the company.
It is important to note that you are not required to have a company to transact in real estate, you can start a sole proprietorship and proceed with your business. It is essential to understand that whether you are alone or you plan on registering a company, there will be regulatory requirements when you get your first piece of property.
The most important is paying taxes and getting insurance for the property. When buying commercial property, make sure you comply with coding and zoning issues to avoid legal problems. Also, check with the state laws on real estate investment to make sure you comply.
Protecting your real estate assets
People spend years establishing a real estate investment portfolio, only to have one lawsuit take it all away. As you are venturing into real estate, understand that there are risks involved in the business.
People fall from balconies; porches collapse, houses catch fire, carbon monoxide leaks happen and many other types of accidents. Note that these are not alarmist claims and you can be sued for something that you did wrong or failed to do.
Anticipate all these scenarios before they happen and make sure you are prepared.
- Purchase a business liability insurance policy, to be safe, have business liability insurance and umbrella business liability insurance.
- Avoid registering the company in your name. Most real estate companies are registered as a limited liability company, corporation or partnership.
- Consult with a competent asset protection lawyer and have them design an asset protection plan which will be beneficial to your business.
Asset protection is not a reserved to the rich, and it does not mean hoarding money in offshore accounts. As a real estate investor, this plan will help minimize your exposure to the risk of future lawsuits.
If you have registered a real estate company as an LLC, it means that in case a lawsuit arises, only the assets in that business can be used to settle the claim. On the other hand, if the company is registered in your name, your assets can be used to pay the claim.
The benefits of high return real estate investments
Despite the challenges that come with establishing a real estate investment portfolio, there are many benefits which arise from it. First, investing in real estate creates cash flow. This is the money left floating around after all the bills have been paid. When you have healthy cash flow, you can make other investments, travel and reinvest in real estate.
The second way in which high return real estate investments can benefit you is the tax benefits that you get. Real estate property owners are entitled to tax benefits which include depreciation and gains for long-term investments. Another advantage that comes from real estate investing, especially for rentals, is that the tenant will be making the payments and once the mortgage is cleared, you will have a property that you can continue renting or selling.
Finally, when you choose your investment locality right, you are assured that the property will appreciate in value, and if you ever need to sell it or get a mortgage, it will be worth more than its current cost.
The benefits of investing in real estate are countless. In investing, ensure that you understand all the rules and regulations to protect your assets. A real estate investment professional will help you navigate all the loopholes which come with investing and protect you from possible mistakes and losses that could result. Take time and learn before venturing into the business.