Is Investing in Real Estate Right for You?

Did you know that Mark Adams and Associates can help you establish and grow your real estate investment portfolio? A large portion of our business is helping our clients invest in their future, not just with their personal homes but with investment properties. Whether you are interested in purchasing single family, condo/townhome, multi-family, or commercial investments, we are here to help. We know the market, will negotiate the best terms for you, provide referrals for inspectors, lenders, property managers, and any contractors needed to ready your purchase for the rental market. We are your full service real estate company for life!

1. Why am I investing?

It may seem like a basic question, but if you’ve thought about investing, you really need to be able to fully answer why before you dive in. Are you doing it for an income? Or are you looking for appreciation? Are you planning on using the property yourself? Or a combination of all 3, perhaps? There’s potential for all of those objectives in real estate investing, but it’s important to decide why you’re investing beforehand because there’s often a trade-off. For example, you might be able to earn income from a property that may increase in value with time, but your ability to use it may be limited, if you would like to enjoy its rental tax benefits.

2. What kind of investment do I want?

Depending on why you want to invest, you’ll have to decide on what kind of investment you want to make. There are many different types of real estate investing. You can use the property for traditional investing, Airbnb (where allowed), or as a flip. These options tend to be more hands-on and require more activity from you. So, decide on what kind of investment you want before jumping in. 

3. Am I in it for the long run? 

Or do you just want to be on the sidelines? Many people who think of real estate investing as merely a hobby or an easy retirement plan failed to handle the responsibilities of the job. Unlike buying stocks and bonds, real estate investing is a long term commitment. Make sure you’re able to dedicate the time needed, so you can truly benefit from your investment. 

4. How will you finance your property?

There are so many options now for real estate investors; cash, bank loans, private lenders. You’ll have to assess your finances and decide how you will secure your property before investing in real estate.

5. How long are you willing to wait for a return? 

Unlike trading stocks or buying mutual funds, real estate investing doesn’t make you rich quickly. You’re most likely going to have to wait a while before seeing returns from real estate investing. Real estate investing can be quite profitable, but depending on the market, you just may have to be patient. 

6. What is my risk tolerance? 

There’s an inherent risk with real estate investing. After you’ve answered all the questions above, check to see how much risk you’re willing to take before diving in. Everyone’s comfort level, depending on age, income, current situation, differs. If you’re going for traditional real estate investing, then you’ll need to find a property that is rentable because there could be a risk of not getting tenants. With Airbnb or Homeaway, you will need to find a place close to tourist attractions or the convention center, anywhere visitors are likely to congregate. If you’re flipping homes, the assumption is that you’ll be able to sell the home at a high enough price that it will cover its initial cost and give you a profit. You’ll need to assess your risk tolerance based on your investment goals. 

7. Are there any tax benefits that come with investing in real estate?

The tax benefits that come with investing in real estate are endless. Becoming a rental property owner, however, is arguably the easiest way to receive these benefits; but certainly not the only way. When you rent a property, you can deduct a number of expenses including, but not limited to, depreciation, repairs, interest, and taxes that relate to the common property.

8. How should I structure my real estate investing company? 

The most common way to structure a real estate business is by forming an LLC (limited liability company). However, individuals can also opt for an S Corp or Sole Proprietorship. LLC’s are most universal in the real estate investing industry because it provides a separate and distinct legal entity, meaning that an LLC can obtain a tax identification number, open a bank account and do business, all under its own name. The primary advantage of an LLC is that its owners, known as members, have ‘limited liability,’ which signifies that, under most circumstances, they are not personally liable for the debts and liabilities of the LLC.

If you think real estate investing is right for you or want to talk more about your options, give us a call at 804-237-8585, or ask us about one of our free educational classes on investing.