If you’ve just started investing in real estate, you probably realize that there’s a ton of things to learn. In fact, investing in real estate is much harder than stock investment, because of all legal, financial and due diligence requirements involved.
So before you invest in your first property, you have to do some homework. For starters, you need to learn the basics of the real estate business. After all, you have to crawl before you walk, right? In order to help you get started, here are a few basic tips for real estate investment.
Real Estate Business & Laws
Location of the Property Matters
Before you invest a larger sum of money into a property, you need to make sure that it is situated in a good location. Long story short, it’s much smarter to invest in the worst house on the best street than the other way around.
While these houses will need some additional investments – they usually require some work – they are located in a good neighborhood, which means more than you probably realize. In the real estate world, this is more commonly known as fixing-and-flipping a property.
Understanding Tax Benefits is Vital
Your local government officials want public housing provided by private investors because if they don’t the officials will be responsible to provide proper housing for people. Luckily, the government will give you some good tax benefits for this.
The most well-known, and possibly the most important benefit of this is the so-called depreciation tax write-off. If you need some additional information, you can take tips from legal professionals
Your Credit Report is Pretty Significant
Most people need to get a loan before they start investing in real estate; this means you need to check your credit report before you get into the business. Moreover, if you have certain mistakes in your report, try to correct them as soon as possible.
And if you have legitimate problems, you should consult an enrolled agent to help you work things out on short notice. Banks don’t give out loans if the if you’re not going to use it for purchasing a new home. You can’t really expect to get a property loan if your credit isn’t immaculate.
Utilizing the One-Percent Rule
If you want to buy a property that you plan on renting to residents, you have to get familiar with the “one-percent rule.” You should utilize this rule when you’re deciding whether the property you’re eying is worth the price or not.
The rule is pretty simple – the property needs to produce at least one percent of the price you’ve paid for it on a monthly basis. So if you’re buying a building for $200,000, your monthly income should be exactly $2,000.
The real estate business has a lot of benefits – for instance, it’s pretty exciting and it gives you a great chance for great returns with every investment. But you have to realize that some people have also gone bankrupt investing in real estate. Make sure to inform yourself before you start.