Investing in real estate has always been a great way to diversify your income, protect your money and earn more. Understanding the basic principles behind successful property ownership is key. Owning a home and an apartment building require different skills and its important to understand the differences between the two.
Reasons to Invest
Many reasons people choose to invest in real estate are:
- Steady income stream for a long period of time
- Growth in net worth through the increase in property value
- Potential tax write-offs to lower your tax obligations
- Security through the ownership of a fixed asset versus the market
- Diversification of your investments
- Multiplication of your sources of income. Earn money while you are away
First Time Investors
Some tricks of the trade are vital for first time investors. Its important to focus on your first investment in many ways:
- Choose a property in a good area close to your home
- Don’t purchase too large of a property. Start small. Limit your risk and your exposure
- Control your situation by limiting your liability. Consider establishing a holding company
- Insurance is key
- Finding good financing and favorable financing
- Work with a broker to help guide you through the purchase process
- Ask around. Who else around you is already an investor?
As a seasoned investor I can say I always focus on the numbers. Looking for the best deal in an up and coming market is always a great way to grow your net worth. Some thoughts to keep in mind:
- Property Appreciation in certain areas
- Local market & surrounding real estate values
- Future property potential, are rents at or below market rate? Could they be higher?
- Could the renovation of a property result in a more valuable and more profitable investment?
- Growth of your portfolio – are you protected, control your liability.
- How much, is too much? When do you need help managing your growth?