Real estate investing is hotter than ever, and it’s no wonder why.
Mortgage rates are low, home prices are strong, and demand for rentals is growing.
But if you’re interested in investing in real estate, where do you start? And what do you need to know? Here are five crucial tips I’ve gathered over the years and from other successful real estate investors to help you out:
1. Don’t stick to your own backyard
Many real estate investors limit their search to neighborhoods they know well. This might cut into your potential for profit. The best deals might be a bit further away, and emerging neighborhoods might offer better growth potential and tax incentives.
2. Use the 1% rule
A good rule of thumb for real estate investing is to look for properties that will offer a monthly return that is greater than 1% of the sales price. In other words, if a home costs $100,000, you should only invest in it if you expect to get at least $1,000 a month in rent.
3. Don’t over-rehab
An investment property doesn’t have to look like a Pinterest photo shoot. Instead of trying to convert an investment into your dream home, go with middle-of-the-road fixtures—and save yourself both time and money.
4. Look to single-family rentals
Single-family homes tend to consistently appreciate. They are also most likely to attract good tenants, and they are something you have direct experience with—and can evaluate personally.
5. Understand the tax benefits
It pays to know the many possible tax benefits associated with real estate investing. These include deductions for depreciation, mortgage interest deductions, and maintenance, as well as the benefits that come from investing through qualified plans like self-directed IRA accounts.
Now, these five tips are valuable—but they are only a start.
If you’re seriously considering real estate investing, I’d advise you to first take a look at some of the great homes available around our area:
And if this gets your investment appetite going, give us a call at 217-351-4900. There are two reasons why.
First, we can give you our impressions about which types of homes (and in which neighborhoods) might make for a sensible first investment.
Second, we can also point you to other professionals we personally trust—mortgage brokers, tax advisors, contractors—who can help you make that first investment profitable with the minimal amount of fuss.
We look forward to hearing from you!