The article gives a detailed analysis of 5 must – know tips for property investors. Recently I was listening to a colleague speak on the many passive income benefits of real estate investment. The whole deal about how you can buy a home and either flip it (by renovating it and selling it for a profit) or renting it out can help you enjoy a second source of income without much effort (i.e., either as a landlord or home flipper).
However, many people don’t consider the upfront costs of either flipping a home or renting a home – especially if you are new to the real estate realm. That’s not to mention knowing the ins and outs of property investment—such as taking advantage of certain tax deductions, maintaining a rental property, and knowing the potential cash value of a home before you put your money down on it.
That’s why I wanted to share some must-know tips for those who are just starting out in property investment. I would suggest becoming familiar with the following aspects of house investment before you buy.
What is the property potential?
Seeing a rundown home and instantly shrugging it off as a bad investment is one thing, but the same can be said for seeing a really beautiful home and just assuming it’s worth a bundle. So many factors go into determining the value of a property—including things like the neighborhood value (what are nearby homes selling for?), the price of similar homes in the same area (what are 3 bedroom bungalows selling for in the area?). I suggest doing this type of research before buying any home because is vital to ensuring you receive a fair deal on a purchase.
What’s the viable price of the property?
Meaning that the listing price of a property goes well beyond the listed price and that you also need to consider the following:
- House maintenance
- Upgrades if you’re planning on flipping
- Property taxes
- Utility costs
Are there any tax deductions that can be taken advantage of?
Those newer to the property investment industry sometimes aren’t aware of the tax breaks and incentives available. For example, you can save a lot of money on an investment property if you’re familiar with concepts like tax depreciation (or a property’s appraisal depreciation), or growing your income by taking advantage of the 1031 Exchange.
What is the structure-value of a property?
Sure, the home might look all spanking new and in great condition from outside the brick and mortar, but what’s really underneath can reveal all sorts of financial horrors. Before buying any property always have a trusted home inspector on hand to give it the once over for things like sound structure, plumbing, electrical issues, pipes and pluming, and other nightmares that can make you lose your shirt when it comes to investing in a property. Knowing the ins and outs of a property can also help you snag a better price if there are issues that you can fix.
What is the potential cash flow of a property?
For last I want to talk about what I consider the most detrimental piece of information when it comes to property investment. Potential cash flow considers all the little hidden costs and tax breaks that go into an investment home—such as maintenance costs, repairs, and etc., and determine a realistic cash flow based on the income you make as well as the costs you pay.