Getting Started on Real Estate Investing

Looking for a new financial opportunity ? Investing in stocks, bonds, and mutual funds are great ways to make money for the young investor. However, real estate investing has a particular advantage over these traditional investments practices. Why? Investing in real estate grants you, the investor a degree of autonomy that is simply not possible with stocks, bonds, and mutuals funds. Sure, you may be able to control in which stocks you put your money in, but you simply cannot control the volatility of an unpredictable stock market.

Investing in real estate is more than a one-and-done investment, but works instead like a business. According to Donovan Ryckis, advisor at J Donovan Financial: “It will require time, management, and due diligence above and beyond most investments.” On the plus side, you have almost complete power over decisions related to the property. In a way, you become your own CEO, even if you’re only managing one property. So how do you start investing in real estate successfully? Check out these great tips from Jeff Brown of US News and World Report.

Buying A Vacation Property

Buying a vacation property is only suggested if you intend to use your vacation property. You can rent out the property for short-term renters while you’re not using it for your own personal luxury. You will want to find a property that is affordable, but that is still close to the main attractions and town-centers. Just remember that vacation home markets are susceptible to volatile markets unlike other forms of rental properties. When the economy is in a slump, luxuries like vacation homes take a toll.

Buy a Full-Time Rental

Renting a home or a property is one of the oldest forms of producing an alternative income. You can either buy a home or a condo and choose to rent it out, or rent out your current home or property. Many people decide to convert their homes into, two family homes in order to collect rent while maintaining their living space. It’s a stable form of making money and should be considered. Just watch out for bad renters.

Flipping a House

Unlike in reality shows, flipping a home is very difficult. The process will most likely take a few months as well as decent sums of money. You will need knowledge of how homes are built, and expertise on how to make the changes you want. Brown’s article suggests staying away from this step if you are neither patient, nor construction savvy.

Investing in your Own Home

Investing in your own home means adding new value to your home. Certain remodeling and renovation projects can add a great deal of value to your home. Things like a kitchen remodeling, adding a patio or a deck, or renovating your basement can add extra value to your home. Not to mention, you can also enjoy the immediate benefits of doing so as the homeowner. Once you sell, your home’s overall price should appreciate.

Buy into Real Estate Investment Trusts

REITs act much in the same way that mutual funds do, however in terms of real estate instead of stocks and bonds. Certain REITs specialize in certain property types such as residential or commercial, so make sure you know which ones are best for you. REITs also spread risk among many different properties, and are professionally managed by experts in the field.

 

Pros & Cons of Investing in Tax-Lien Properties

A tax lien is something no one wants on their record because it can be such a financial burden to overcome. When a owner of a property does not pay local or state taxes the government has the option to place a lien on the property. Once this takes place, the government issues a tax-lien certificate, which are usually sold in most counties and cities to people who are looking to invest in tax-lien properties through an auction process. Investing in tax-liens can have huge benefits but there can also be some risks to go with it. Here are some of the pros and cons of Investing in tax-lien properties.

Property Ownership

The taxpayer is granted an time period to pay off the tax-lien certificate.  If the taxpayer’s time is up and it is still not fully paid, then property is all yours! That’s right, all yours. You will be taking ownership of whatever property you held the lien on.

Homeowner Bankruptcy

A huge con for investing in tax-lien properties is when the owner of the property declares bankruptcy.  This is something no investor wants to be a part of because once the owner of the property declares bankruptcy there is strong possibility that your investment may be at risk. I know– that is not something you want to hear especially if you invest a great deal of already. The reason for this is because you won’t be the only one to have claims on the property… the IRS will too.

Return on Investment

When investors look to purchase tax-lien certificates, they gain property plus interest on the tax-related debt of the property. The investor then collects interest on the debt until it is paid off by the owner of the property.

Property Value

Investors should be doing some major research on properties before investing in a tax lien. The reason I say this is because there could be some significant damage done to the property and may require some expensive repairs that may not even be worth investing in. There are investors out there that take the chance, but it can be extremely risky because property can be worth much less than originally expected once inspecting it.

For more infromation on Investing in Tax-liens, check out: http://homeguides.sfgate.com/pros-cons-investing-tax-lien-properties-1191.html