Investing in real estate can be a great way to increase your capital as long as you know the market. While many people consider real estate to be a great way to invest funds, you need to know the industry if you really want to maximize your returns.
To ensure you’re ready to make a profit from real estate in 2020, take a look at what you need to know to get started:
1. Recognize a Good Market
Being able to recognize the indicators of a good market will allow you to choose where and when to invest. In a good housing market, homeowners are usually able to sell their properties close to the asking price. When interest rates are low, it stimulates the market, which is good for investments. When house prices and the rate of house sales increase at a similar rate, it’s an indicator that the market is performing well.
2. Match Your Budget
You don’t need a large amount of money to start investing in real estate. While larger investments can make higher returns, matching your project to your budget will enable you to build your investment portfolio more quickly. With many different types of real estate available, it’s always possible to find an investment opportunity that matches your budget.
Remember–even if your budget doesn’t suit a real estate investment in your first-choice location, property and land prices can vary wildly. By choosing an alternative location for your first investment, you can find the right project for your current budget.
3. Decide Your Involvement
Real estate investors take on varying roles depending on their preference. You may prefer to work with an investment manager or a project manager who handles the entire project. Alternatively, you may want to be involved in all spending decisions and choose which subcontractors to hire yourself.
There’s no right or wrong answer here. But it’s important to think about how involved you want to be to know what projects to invest in and where. Knowing how you’re going to manage your project to help you establish what type of investor you’re going to be.
4. Look for Housing Trends
Housing trends are a great indicator of what type of residential properties are selling well. Both Build for Rent (BFR) and Single Family for Rent (SFR) housing has been popular recently which could make either a great investment opportunity. By evaluating housing trends in your chosen location, you can ensure that you invest in housing that’s going to be popular and easy to sell upon completion.
5. Understand How the Market Changes
The property market is never static, so understanding how it changes and what this means for your investment is vital. Furthermore, working with contractors who know how to respond to a change in the market can be critical to your success.
MAP Land and Homes, a residential general contractor company in South Carolina, recommends finding an experienced contractor that knows how to adapt to a changing market if things fluctuate during a project. By doing so, you can ensure that your contractor understands your priorities as an investor and is able to evolve the project in line with the market.
6. Assess Your Tax Liabilities
Before you consider investing in real estate, it’s vital to assess what your tax liabilities will be. If you don’t have experience in this area, it’s usually beneficial to talk to an accountant, financial advisor, or investment specialist. By working with finance professionals, you can incorporate tax planning into your project and minimize your tax liability as much as possible.
By knowing which costs can be deducted from your profits, for example, you can ensure that you aren’t paying more tax than you need to. Similarly, you can ensure that the project is still worthwhile when your tax payments are taken into account. In some cases, how you structure your investment affects your tax liability, so talking to finance professionals from the outset can help to ensure that you’re operating in a tax-efficient manner.
Start Investing in Real Estate
With the right preparation, investing in real estate can be an exciting and lucrative way to generate a profit. By taking the steps above, you can learn what you need to to make sure your real estate investments in 2020 will generate revenue for decades to come.