While real estate investments can be risky, they also can be one of the more lucrative investment vehicles available to you. Consider that the full value of real estate appreciates despite the fact that you leverage the investment with a real estate loan. In addition, your tenants will make payments to cover operating expenses and to pay down your mortgage. Another important benefit is that there are numerous tax deductions available that can offset taxes owed on the regular income that your property generates. If you have decided to invest in real estate or if you are ready to increase your existing portfolio, consider how these tips may benefit you.
The ability to leverage your real estate purchase with a mortgage is an incredible benefit that you should take full advantage of. There are numerous investment resources that you can use, such as online calculators, that can help you to find the sweet spot regarding a desirable and beneficial mortgage loan amount for a specific property. You can likewise use these calculators to periodically estimate your equity and to determine if it is time to pull equity out of one of your investments so that you can expand your portfolio.
Hire an Experienced Real Estate Agent
You understandably do not want to make a real estate purchase without the assistance and guidance of a real estate agent but understand that some real estate agents specialize in helping investors buy and sell investment properties. Some specialize in income-producing residential properties, and others specialize in commercial properties. The market knowledge and overall expertise of this type of professional may be invaluable in some situations.
Understand the Tax Implications
Taxation plays a major role in the profitability of your real estate investments. Through regular operations, you will pay tax on the net income of your properties. This is the gross income offset by operating expenses, mortgage interest, and depreciation. There are also tax implications when you buy and sell properties. According to experts on 1031 exchange, “Per Internal Revenue Code Section 1031, an investor can defer capital gains tax and depreciation recapture by reinvesting the proceeds from the sale of investment property into a ‘like-kind’ replacement property. Thus, the full amount of any sales proceeds can be re-invested and thereby providing added potential income while preserving and growing wealth in their estate.” For example, you can sell a small apartment building and use the proceeds to purchase a larger and more profitable property without paying capital gains.
While some investors are content to own a single property, many prefer to maximize their investments in various ways to achieve specific goals. Through these important investments steps, you can more successfully expand your portfolio for maximum gain.
If you have more questions about investing in real estate, check out the professionals here that can answer your questions!