If you’re interested in making an investment, you might be considering real estate. After all, it’s widely accepted that a strong real estate investment has the potential to generate considerable wealth. The catch is that it can be a complex investment and, with today’s wide variety of opportunities, it’s important to have sufficient knowledge of how to approach all types of real estate investment methods. Here are a few important questions that every prospective real estate investor should keep in mind.
Will you be able to invest actively or would it make more sense for you to invest passively?
To answer this question, you’ll have to consider how much time and expertise you currently have. If you have the inclination and time for being a landlord, active options might suit you. However, if you simply want to make an investment but are either not interested in or unable to deal with properties and tenants firsthand, a passive investment might be best. This decision not only impacts what type of investment you pursue, but how much it will cost to get started.
What is your investment timeline?
Some investments are particularly illiquid, though this isn’t necessarily a bad thing. It’s important to define a timeline, or investment horizon, before investing any money so that you’ll know if you’ll need liquidity and whether a particular investment will meet your needs.
What are the potential tax benefits?
Both active and passive real estate investments offer their own tax advantages. The exact benefits will depend on the investment, so it’s important to take a look at what taxes will be like with each potential investment.
How can real estate affect your portfolio?
One of the biggest benefits of investing in real estate is its ability to diversify a portfolio. However, it should be noted that not all diversification is equal, so it’s important that you understand how a real estate investment will impact the overall risk and earning potential of your portfolio.
What do you want in a real estate investment? How will you determine if it successful?
Are you interested in flipping houses or would you prefer to be hands-off? Do you want an investment that will take care of itself or do you want to be more involved? Realizing what matters most to you in an investment will help determine how you define its success. If you need more information on our property, feel free to contact our office?