Investing in real estate means putting your money at work today to gain more funds as a regular return on investment. The return and profit you get from your assets will be enough to compensate for the taxes you pay and the risks involved.
However, besides paying for the property, you’ll need to consider other expenses that comes with owning properties, like maintenance, insurance, and utilities.
Real estate investment is simple when you understand the primary factors of the risks involved. You buy buildings, earn money through rent, and avoid going bankrupt to gain more money and invest in more properties.
Sounds simple, right?
Don’t forget that simple doesn’t imply easy. Once you make any mistake, the effects could range from major disasters to minor inconveniences.
Here’s everything to know about investing in real estate in Georgia. You’ll also discover the four ways you can make money from real estate, tips on real estate investing, and its pros and cons.
Don’t forget to go through a real estate broker like Tim Stout to get the best property deals.
Three Ways Real Estate Gives You Money
There are three primary ways of making money in real estate. They include:
Cash Flow Income
This real estate investing type focuses on buying properties, like apartment buildings and collecting rent from tenants. You can also get income from other real estate types besides apartment buildings, like rental houses, retail facilities, offices, and storage units.
Real Estate Appreciation
This method of gaining money from real estate occurs when a property value rises in the market. For example, the land your property is located on can become busier and more scarce if a large shopping center is built nearby.
Suppose you made some upgrades to your property to make it attractive to buyers; it’s still part of real estate appreciation. Real estate appreciation is challenging to predict and riskier than investing for regular cash flow income.
Ancillary property income includes things like laundry rooms in apartments or vending machines in office complexes. For some investors, these things pose a vast source of income.
Thus, ancillary incomes involve mini-businesses within another real estate property. So you make money from a collection of customers.
Tips for Real Estate Investment
To invest in real estate in Georgia, you’ll need to keep your finances in order. You can take out a mortgage for the property and use leverage to acquire other real estate investments.
Using leverage to buy properties is sometimes dangerous. When the market falls, regular mortgage payments and interest expenses might drive you into bankruptcy.
You can also hold real estate investments through limited partnerships and limited liability companies. That way, your investment is protected.
Pros of Investing in Real Estate
Steady Cash Flow
Rental properties provide you with a steady flow of incomes monthly, known as cash flow, which is the money left after deducting the property’s operating cost.
Once you’ve got a rental property through a trusted Georgia realtor, you start enjoying a monthly cash flow, allowing you the freedom to invest your time in profitable ventures, such as more real estate investments, spending time for your family, or building a business.
Lets You Use Leverage
Leverage means using your borrowed capital to buy or increase your potential return on investment. It’s one way to quickly boost your wealth-building results and develop your real estate investments.
When used wisely for minimizing risk, leverage is a powerful benefit of investing in real estate. You can use a conventional loan and buy your first property with a 20 percent down payment.
After your due diligence, you can grow your wealth exponentially through leverage, especially in low-interest markets.
When you utilize leverage wisely, rents from your tenants help you pay back the loan every month, building equity for you. Suppose you bought a rental property through a mortgage, your renters also pay the mortgage payment, increasing your net worth every month.
Appreciates Over Time
Real estate bought at a good and strategic location appreciates over time, far outpacing annual inflations. It’s true people can acquire the wrong property types at the wrong time; however, you can buy property at a discount, improve it to increase its equity, and then sell for profit.
Real estate properties have intrinsic value. A stock can reach zero price, but real estate always maintains value as a tangible asset from the building and the land.
Simply make sure you’re working with a realtor with a Georgia real estate license to get the best property deals.
Unique Tax Benefits
The unique task benefits that come from having a real estate investment enables investors to grow their wealth. Rental income isn’t subjected to self-employment tax, with the government offering several tax benefits to investors.
These benefits include lower tax rates on extended profits and depreciation. Depending on your classification as a real estate professional or investor and income level, you can enjoy overage tax deductions for use against other incomes.
Cons of Investing in Real Estate
Real estate investing needs money compared to other investment types. When buying a property, you’ll drop at least a 20 percent down payment, plus closing costs and repair money to ensure the property is upgraded for maximum rental income.
Once you buy the property, other expenses require money, like mortgage payment, insurance, property taxes, and property maintenance.
Real estate is a long-term investment that you can’t liquidate for cash immediately when you need emergency funds. Selling a house is a tedious and lengthy process, and the transaction costs are enormous compared to selling stock shares.
Real estate investing takes time to learn and manage. You’ll lose lots of money in real estate if you don’t follow the learning curve and understand Georgia real estate market trends. More so, actively managing your properties is often time-consuming.
However, you can hire a real estate management company to handle the daily operation and management but at a price that reduces your rental income.
The Bottom Line
When trying to buy real estate in Georgia, it crucial to weigh all factors that can determine if your investment can earn a profit or not, like the neighborhood, taxes, potential rental incomes, leverage, the property’s quality, and your financial situation.
Consider checking Tim Stout and Associates website to get all the necessary information you’ll need about investing in the Georgia real estate market. Most importantly, you’ll see available and affordable properties to start your real estate investment journey.