15 Jun Investing in Real Estate? What you NEED to Know
Goals and Objectives of Real Estate Investing
For most people, investing in real estate is a big deal because it covers a huge part of their assets. Many would-be investors are looking at 2018 to get in the game with some markets hitting all time highs. Many people also begin their investment not knowing what their real objective is with such a move.
This information is not about how to set goals but about a couple of most common goals that investors usually set out for during real property purchase.
Leveraging Real Estate to Build Wealth
Building wealth is one of the most popular objective of real estate investment. Everybody wants to be rich by investing and reinvesting. In fact, more and more investors are choosing this type of investment in place of stock market. Unfortunately, little do they know that re-selling a property is not the only way to build wealth.
Wealth can be built by choosing the right purchase in the right place and waiting for that big thing to happen. It can also be done with a few tax-deferred move.
What Stage of Life are YOU in?
The question is who should do what or when? For example, a young investor of age 25 has almost a lifetime to balance his or her personal finance portfolio, even room for potentially disastrous investment. He or she could sell a home and invest in commercial property a little over their budget.
But when an investor is 65, it would be hard to recover from a bad position. The tax-deferred 1031 exchange offers investors a chance to save on taxes while these investments are made. Investors with this opportunity can step up their investments as well.
For example, an aggressive investor can trade a rental house to a multi-unit apartment building. Similarly, investors can focus their attention from their desire to buy a home to commercial properties to take advantage of this tax saving opportunity.
Your Real Estate Assets
Protecting assets is a must when you are a serious real property investor. This is another objective of property investment that some people overlook. The desire to protect comes from many factors such as age, risk taking ability, financial needs and other reasons.
An aggressive-minded investor will take chance that an investor who wants to protect assets will not. Protecting assets is about making slight changes to investment that make sense for the long haul without losing the stability that the investment offers.
Real Estate for Cash Flow
Another objective that most investors want to have is to generate a steady stream of income. Rental properties offer great opportunities to investors – young or old. Some would-be investors are under the impression that real estate provides an immediate, positive cash flow.
Cash flow, although nice, is generally not an immediate goal of real estate investment. Although you should try to structure your real estate deals to have some positive cash flow, the month to month “extra” is generally re-invested into the property. In some instances, cash flow can be acquired by the investment property in a beachfront condo as opposed to a single family home and leveraging short-term rentals.
Again, there are many ways to save money with this type of investment and private annuity trust or charitable remainder trust in some cases is the best way to go.
In a private annuity trust, for example, the property can be bypassed from paying tax and any capital gains that are made would be unreachable to creditors. Whether this trust or other available option is right for you depends on your set of circumstances as well as personal objectives.
Getting Started in Real Estate Investing
Investment Planning – A Holistic Approach
For some investors the biggest factor influencing their investment or reinvestment decision is estate planning. Investors who are into estate planning need not be rich but they need to smart. These investors need to make decisions based on their needs and make it comfortable for their heirs to inherit.
In other words, a proper estate planning will make an estate more manageable to people who will inherit the estate while minimizing future estate taxes. Sometimes investors are required to trade a high maintenance property to a low maintenance one. This is when estate planning as objective comes into picture.
In essence, no matter what the specific situation is, it is important to have an objective that makes life easier for the investor and their heirs.