When it comes to investments, there are some that can drain your funds, like buying a car with your first salary, and others that can put more money in your pocket. One of the investments we’ll be discussing today is buying real estate. When people talk about making a passive investment for income, they typically mean investing their money in the stock market with a dividend-paying company. However, investing in real estate is an option that is somewhat underrated in the eyes of many people.
But believe it or not, real estate is known to be one of the safest and best places to generate passive cash flow. If you do it right, you’re going to be able to rent it out to somebody else, and this rent that you get is going to cover your expenses, your taxes, your insurance, your maintenance, and your management fees, and it is going to put some money in your pocket every single month. If you do it right, you can hire a property management company to deal with all the day-to-day work.
So, let’s list six major reasons to encourage the minds of new investors to take a step forward in investing in the real estate business.
Stability
Stock prices in the stock market change every single day for unknown reasons. This can impact the public emotionally. It sometimes creates panic and rushes to sell or buy stocks in response. Thus, some people end up with a loss in the stock market which happens quite often, even with professional investors. But real estate doesn’t work like that. After all, We will always need a place to live, we will always need real estate. Real estate covers this most important need. When you buy a property, you need not worry about checking out the rates every single day, because in real estate the market is not that much volatile except during crises.
Income
You are creating passive income streams when you invest in real estate because you will get paid month after month because your tenants will have to pay you to rent in order to use your property. By doing this, you can start earning money right away and use it to either reinvest or spend today rather than hoping and praying that your investment will pay off in more than five years.
The stock market does have dividend-paying stocks however dividend-paying stocks usually pay less than the income you can get from real estate. Apart from that income, you will get capital appreciation after a period of time in the long run.
Tangible asset
When you invest in real estate, you own something tangible that you can see, feel, touch, control, and manage the way you want. So let’s say you bought a house, and as an investment, you can see the house, walk inside the house, control what kind of appliances and what kind of windows are on the house, and manage your investment property exactly how you want.
Tax Incentives
Real estate has some of the best tax breaks that our entire tax code has to offer. You can invest your income from your first property as an investment in your second property. The benefit you will get out of it will be in the form of an exemption. If you take out a mortgage for a second home, you will not be required to deduct the interest from your taxable income. Additionally, if more than one borrower uses this loan, everyone will qualify for the exemption. You can deduct up to Rs. 50,000 from your home loan thanks to Section-80C, after which you will only have to pay back the principal to the lender.
Diversification
With real estate investment, portfolio diversification will be possible, which eventually impacts the volatility of your holdings and will help you decrease the level of risk and build more chances of getting a return. There is a pattern or can say a common thing in the market, which is assumed to be true in the form of a quote,
“when the stock market plays with your feelings then real estate gives you good dealing”
which means when the stock market is not performing well then there are more chances that there would be an increase in the growth in real estate. Albeit in the financial boom, real estate would still offer sound returns.
Insider Trading
Insider trading is encouraged and legal in real estate.
Let’s say you went to your city plans. You saw that Amazon was planning on opening a huge office in your city, and as soon as you saw the opportunity, you started buying up properties around this planned development. As soon as Amazon announced that we would be opening this new office, the rates of your property valuation skyrocketed. You did nothing illegal; this is actually encouraged and is called due diligence.
In the case of the stock market if you made an investment based on information that has not been published yet that’s called insider trading and you can go to jail for that.
Knowing how to buy a home is important because it’s one of the biggest purchases most people will ever make. In this article, you’ll learn all the necessary advice and steps for buying your dream home in detail.
If you are a first-time homebuyer, you might be gauged with anxiety and consciousness related to how to make the best choice because of some opinions you might have heard that buying a home is a very cumbersome process.
Also, buying a home for the first time is deeply related to your heart, and it brings up your sentiments and lets you focus on the kosher things that you need to heed to achieve your dream home. We are there for you to help you along your journey to buy the finest choice.
Here are 7 tips we need to talk about while deciding to buy a home.
Prequalify Yourself
Getting prequalified must be your first priority before buying any property or home because the last thing you don’t want to happen is you fall in love with a home and then you find out you can’t afford it. You should get pre-qualified before you start looking for a home because it will give you an idea of how big of a home you should be looking for. It will save your time as a buyer and it will also save the seller time plus,
If you are already pre-qualified to buy a home will tell the seller that you are serious and you will have the cash ready to purchase the home. As the last thing the seller wants to do is to take their home off the market because somebody wants to buy it and then suppose 60 days later they find out that this person cannot get the cash to purchase the home will take that person into trouble or loss of contract.
So if you are pre-qualified you are more likely to get accepted with an offer because you have demonstrated that you will arrange the cash to purchase the home.
Real Estate Agent
There are two types of real estate agents with which you can deal. You have buyer agents and listing agents. The buyer agents are those who help you find out a home for you.
Listing agents work on behalf of the seller, they help to find a client for the seller to sell a home. In a final deal process, the seller pays both the listing agent and buyer’s agent a certain sum of commission which is split equally or a mutual share between both.
If there is no buyer’s agent only a listing agent then the seller can discount the price of the home because now they don’t have to pay as big of a commission. This might cut down the cost and time invested in the deal.
Prioritize Your Desire
Before checking out make sure the necessary things you want in your home and premises. You should prioritize what you want in a home but you also want to kind of prioritize what’s important and what’s not.
As there’s a chance that you might not find everything that you want when it comes to buying a home but you need to know what’s very important and kind of make sure you prioritize those as opposed to the things that are not as important.
So some of the things that you can pay attention to are the size of your home, the yard, maintenance, schools nearby if you have kids, the neighborhood, whether close to highways or not, bedrooms and bathrooms you want, and the basement.
Making An Offer To Buy
There are two markets available for you to deal in. The first is the buyer’s market and the second is the seller’s market.
When you are in a buyer’s market now, there are a ton of inventory homes for sale, but there are not that many buyers. When you see that happen, you’re going to see sellers cutting their prices and trying to get more buyers looking at their homes.
But in a seller’s market, the seller has the upper hand now there are a ton of buyers but not as many homes for sale and this is when you see home prices going up. So always try to prefer the buyer’s market for the best deal possible.
Wisely Use Your EMD
EMD (Earnest Money Deposit) is a type of deposit that you need to maintain to ensure trust, faith, and seriousness regarding buying a home.
If now you walk away without any reason, you will end up forfeiting this EMD. However, if you deposit this EMD to your agent in advance and then check out any property or home and find it not worth it, you will be able to get the money back as long as you do it within the contingency period.
Inspection Is Must
When you enter into a contract to purchase a home and the contingency period begins, what you should do is exercise due diligence, which entails taking the necessary actions carefully with an inspector to ensure that there are no issues with the property. This is important because there are many instances in the real estate industry where buyers regret their decisions and feel disappointed after making a purchase because they didn’t get everything they wanted.
Review The Legal Terms, Agreement, And Issues
Using an attorney is a small cost you can pay today that can save you a big headache and a big cost in the future. What you’re paying your attorney to do is review your contract and go through your title documents and your closing documents to make sure that your title company has reviewed everything and you’re protected.