The real estate industry is ever-changing and evolving. But, there are key things about residential real estate that will always stay constant. Residential is one of the most affordable real estate investments and so has become fairly in-demand to both starters and seasoned investors.
A few facts that have not been discussed a lot are below – which surprisingly makes residential real estate more appealing.
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Here are things about residential property investing you may not know about;
Use of equity to increase your property portfolio
A good way to use an investment property’s equity is to grow your property portfolio. For example, let’s say you have $70,000 equity in a home. You can refinance the mortgage on it, take out the $70,000, and use it as a down payment on your next property.
Depending on the value of your properties, you may even be able to pay cash for future properties, increasing your portfolio and the equity in it even faster.
Intentional or Forced Appreciation
Unlike stocks or bonds, you can force property to appreciate. Property normally appreciates at an average of 3% – 5% a year on its own. But, by renovating and doing upgrades, you can increase the rate of appreciation.
Note though that not all renovations can increase a home’s value, work with a licensed appraiser or property agent to find out the best (most valuable) renovations you should make.
In most cases, some renovations can pay you back as much as 80% – 90% of the money invested.
It doesn’t have to be major. However, adding a room or finishing the basement will add more value than simple cosmetic renovations, but even minor kitchen and bathroom renovations can drastically affect a home’s value.
Being a landlord is challenging and hard
You have to be a specific type of person to handle being a landlord. For example, if you buy and hold real estate, you’ll want to rent it out to make money. But if being a landlord is too much for you, consider hiring a property management company.
Good source of inheritance
This is better than leaving money as a legacy. Real estate appreciates over time, unlike money that is affected by inflation.
Aside from leaving an income-producing asset, it’s also an appreciating asset. They can continue to use it as a cash flow source or eventually sell for profit.
Unconventional financing options
Pay all cash or get a traditional mortgage? You may think those are the only two options available for buying residential real estate. Luckily, there is a diverse range of additional financing options.
Seller financing, getting a loan from a self-directed IRA, private loans, master lease with the option to buy … are just a few creative ways to finance your next investment.
Many tax advantages
Investing in residential real estate comes with numerous tax advantages. You can factor in deductions such as property depreciation, mortgage interest, the cost of repairs/maintenance/services,
As always, different people have different tax situations, so be sure to consult your tax professional regarding your personal financial picture.
For a full turn-key, Positive Income Properties comes and sees what we can do for you. As a full-service company, we cover all aspects of an investment property from the land and built to the handover with reliable and qualified tenants.
Call or email us to discuss your Goals, Aspirations, and Budget.
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Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
