How To Start Investing In Real Estate, Part 2
Understanding the different real estate options is important before you begin looking for any “for sale properties.” Having the proper knowledge is the first step to becoming an excellent investor.
Buying Rental Property
Con: Managing Tenants Can Be Tedious
Depending on your personality and the amount of time you have, dealing with tenants might be a big concern – or it might be right up your alley.
To be successful in buying rental property, you have to be willing to manage the properties efficiently and to deal with the tenants professionally.
Con: Vacant Apartments Reduce Income
If your tenant moves out and you have a large gap before new people move in then you will be losing money rather than gaining it. Preparing for these times is something all rental property owners should be aware of.
Con: Tenants May Damage Property
It is common for tenants to cause some level of damage to the rental property – especially renters who have pets. This is certainly something to be aware of and prepare for when you budget.
Pro: There Are A lot Of Tax Deductibles
Taxes are a part of life, and can often be a big expense. When you have income from buying rental property you can make a lot of deductions that can help save you money.
“If you receive rental income from the rental of a dwelling unit, there are certain rental expenses you may deduct on your tax return. These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs.”
Pro: Provides Regular Income
A big reason many people rent out properties is to make an income. Whether it’s extra income on the side, income after retiring, or even in place of a full time job.
How much income you receive from buying rental properties and renting them out will depend on various factors.
Some of these factors include: how many rentals you have, what area you live in, the quality of the property, and how much time you put into it.
Pro: Properties Often Appreciate
When you buy a rental property and fix it up or add upgrades, you are increasing its value. On top of that, many properties appreciate over time even if you leave them exactly the way they are.
However, a good way to increase the likelihood that your property will increase is to make sure to maintain it well and add updates when necessary.
Buying Vacation Rentals
Con: Upkeep Can Be Time Consuming
You will have to put time, effort, and money into continuously upkeeping your vacation rental. Make sure to prepare ahead of time for yearly maintenance.
If you live in a different state, prepare to travel often to go fix up the rental.
Con: Unexpected Expenses
Repairs, maintenance, travel, and other unexpected expenses may sneak up on you. It is important to consider every possible expense while creating your plan.
Pro: Large Potential For Income During Prime Vacation Times
You can gain income all year round with vacation rentals. However, during prime vacation times such as summer and school break, you may be able to make a large income.
Pro: A Vacation Home Whenever You want One
You can have your own lovely family vacation a couple of times a year and barely spend any money by staying in your own rental.
Pro: You Can Deduct Business Related Expenses
Much like in rental properties you can take advantage of the various tax deductions available to vacation rentals.
Con: Unanticipated Expenses
If the home has more issues than you originally thought, then it may cost more to fix than you were prepared for. On top of that unexpected expenses are likely to add up over the process of fixing it.
Flipping a house can be a very stressful process. Unexpected issues, expenses, the amount of work, and the worry of not being able to sell the home for enough money can add up to a lot of stress.
Con: Potential To Lose Money
If the house flip does not go well, or the house has more issues than were originally planned for then you can actually end up losing money.
However, when you plan ahead, you will most likely turn a nice profit.
Pro: Turing A Big Profit
When you can flip a house with success, you can gain a very large profit all at once. This is the biggest reason most people get into the house flipping business.
Pro: Learning And Developing As A Person
Flipping a house can help you gain new skills and develop as an individual. Often, after one flip, savvy investors have gained useful knowledge that helps them choose their next investment project.
Pro: The Reward Of Making Something Beautiful
When you flip a house you are turning something old and broken into something beautiful and new. This journey can be incredibly rewarding.