Today, real estate investment is no longer seen as the preserve of the already-rich. More and more ordinary people are seeing the advantages of putting their hard earned savings into bricks and mortar. This kind of asset investment can be an excellent way to build wealth in the long term as well as secure a regular income – in other words you can achieve not only capital growth but also cash flow.
Getting Started in a Real Estate InvestmentIt’s not as easy as choosing a house in a random city and suburb, finding a tenant and sitting back and expecting the dollars to roll in. There are myriad things that can go wrong for those who neglect to do their proper due diligence, or just barrel in and try to self-manage a rental investment. One of the very first things you need to do is secure the assistance of an experienced property management company. Here at Torres Turn Key, we’ve had many successful years in the business; helping new and experienced investors build and manage their property portfolio in Rochester, NY, and beyond is what we do. If you already have a house or apartment in Rochester, NY you wish to rent out, or you’re considering a purchase with a view to creating cash flow and asset appreciation, we can help. It should be noted from the outset that this kind of investment is not for everyone, but for those who do make the leap, the rewards can be great. It’s important to go into any kind of investment with eyes open, so we’ve cut through the hype to compile this easy-to-understand breakdown of the pros and cons.
The ProsIf you’re reading this article you’re no doubt excited about the prospect of purchasing an investment property, so we’ll start with the positives. Regular Cash Flow: As long as you have a good, reliable tenant in place, property ownership is one of the best cash flow investments there is – but the key words here are ‘good’ and ‘reliable’, because bad tenants are bad news. That’s where an experienced management company like Torres Turn Key comes in. We manage every aspect of your property, and this includes finding, vetting and securing tenants with a good income and rental history. The deal goes both ways, though, and it’s important as a landlord to keep the property in good order, well-maintained and attend to any issues as they arise. Again, we take care of this so you don’t have to. Tax benefits: Naturally, this will depend on your unique financial situation, but owning real estate can not only allow you to grow your wealth in the form of equity, the income/profit is subject to a different kind of tax than regular employment tax, and it can be significantly lower over a long term period. You will also be able to make a range of deductions on depreciation, travel and other expenses. Please note: it’s important to get professional advice before making any decisions. Capital growth: While the real estate market will always wax and wane in cycles and corrections, generally, property will appreciate over time at a greater rate than inflation – and, while costs of living and rent will always increase with inflation, if you choose a fixed rate mortgage for a period, you’ll be able to reap the benefits, as your repayments remain the same. There are also often opportunities to increase the value by making improvements. Of course, capital growth is determined by the location, size and condition of the house or apartment you purchase, so for a first timer, it’s very important to get advice from an expert. Equity, equity, equity: As your mortgage is paid down every month, your net worth grows at the same regular rate. When managed properly, your tenants basically pay off your mortgage for you and this means your equity continues to increase. You control your asset: Control is extremely important for some people, and this is where investment in real estate can be extremely attractive. As long as you have a reliable property manager looking after your best interests, and good strategies in place, you can make all the decisions.
The ConsKnowing that there are ‘cons’ to investing in real estate is paramount to understanding the big picture and making an informed decision as to whether it’s for you. There are risks: Some of the risks involved with this kind of investment include:
- Purchasing at the wrong time
- Having a bad tenant
- Over-leveraging your investment
- Unexpected tax implications