How To Benefit From Real Estate Investment Long-term - Private Lending Blog

How To Benefit From Real Estate Investment Long-term

| Posted in General Lending

August 18, 2022

If you are the type of investor who wishes to buy a property and turn a profit on it long term, then hopefully this post will help guide you in the process.  Property investment can be beneficial to the investor in several ways including the ability to utilize the property as your main source of income or simply reduce the monthly cost of rent, maintenance, interest, etc. That said, it is not always so easy to invest in real estate.  As the property investment market gets more competitive, it is important to have a clear investment strategy. Below, we will look at some basic steps to take to help you start investing in real estate and be successful long-term.

Learn What Work for You

When you invest in a property, you should decide to either invest a certain amount of money into real estate or invest it through asset-based lending but it can be a challenge to know if you’re investing in a good deal to start. It is important to know in advance what investment strategy is right for you ahead of time before getting in over your head on a deal that may not be so easy to walk away from once you have funds or assets tied up.

Asset Based Lending

Asset-based lending is a loan or line of credit issued to someone that is secured by some form of collateral.  When you invest in a property through this method, there is still a possibility that you could lose money on the deal but it’s generally safer because you’re putting down your money to earn it back through future rent. This way, you’re not putting your money at as much risk of losing the entire lump sum you’ve invested. Overall investing in a property through asset-based lending comes with a lower risk of losing significant money long term.

Tax Advantages

Investing in an investment property can provide certain tax benefits that you can deduct including property taxes, interest, property management fees, insurance, maintenance, repairs and more. Best of all If you sell your property for more than you bought it for, the profit will not be taxed as income. Rather, it will be taxed as capital gains which are generally subject to lower tax rates than traditional income. If you invest using asset-based lending, the profit you acquire from the property is considered a capital gain which could help you save some money on taxes long term.

Decide on the Type of Investing

Understanding all of the nuanced differences between passive vs. active investing is an important part of learning how to invest in a property. Active property investments may include hands-on real estate purchases, property management as well as market knowledge that requires a great deal of financial and real estate knowledge.  If you’re not ready to purchase a property, you can still benefit from the additional income and asset value through passive investing with a lower financial barrier to entry.

How to Know if You’re Getting a Good Deal

Before you invest, you should first decide how you are going to invest, whether you decide to purchase a rental property, flip a house, contribute funds through an investment group/REIT, or simply use an online real estate investment platform. When choosing a property investment, consider as many factors that can affect your decision as you can research or think of, including calculating all potential risk and upfront costs. One important area that you’ll want to look for when you’re investing in a property is how much of a return you are getting vs. how much you initially invested in it. One simple way of achieving this is to look at the gross income to the overall cost of the property.  There is no specific amount of money required to start investing in real estate, but obviously more substantial investment amounts can lead to higher returns down the road. It is worth mentioning that different types of investment strategies have different costs, so some investments, such as flipping a property, may require you to make a large lump-sum payment upfront to secure the investment long term for the most future profit potential available.

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