As a Millennial, investing in real estate offers a number of benefits. Of course, to fully enjoy these benefits, it is important to gain a better understanding of some of the basics of real estate investment and how you can make it work for you.
Benefits of Real estate Investment
No matter your age, investing in real estate can offer many benefits. For example, whether you choose to invest in rental property or to flip the property for a profit, you are the sole owner of the property and, therefore, you enjoy all of the profit. If you choose to rent the property, you can enjoy a passive monthly income that also qualifies you for a number of tax benefits. Some of these tax benefits include:
- Write off expenses associated with your rental property
- Leverage pass-through deductions
- Use a 1031 Exchange coupled with a Section 121 to avoid taxes associated with turnkey properties
You can even use the income from your property to purchase additional properties, thereby further expanding your investment portfolio and increasing your monthly earnings.
Of course, as an individual investor, you also enjoy full control of your money. You choose where, when and how much you choose to spend on your investments. The freedom to make all of your own decisions makes you better capable of meeting your specific needs while working toward your individual financial goals.
Achieving Your Real Estate Investment Goals
To achieve your real estate investment goals, you will first need to develop an investment strategy. This means determining what type of properties you wish to purchase and how much you plan to spend. Generally speaking, there are three types of investment properties to choose from. These include:
- Single- and Multi-Family Properties: The two most popular real estate investment property types, single- and multi-family properties offer high demand, good pricing options and the opportunity for increased profitability when you make your purchase through a short sale, foreclosure or bank sale.
- Syndications: Purchased by pooling together funds with other investors, there are two types of syndications. The first, an entitlement deal, allows you to rezone the property and build a residential, commercial or mixed-use entity before reselling the land to a developer at a higher price. The next, a diversified single family fund (SFR) offers more flexibility to buy and hold properties along with shared rental cash flow and earned appreciation.
- Buy and Hold Turnkey Funds: Typically ran as an LLC and allows you to access professional management services, a turnkey fund focuses on buying and holding properties in need of rehabilitation before they can be rented.
When determining which strategy is right for you, you will need to consider things such as your credit score and how much you will need to invest. Before making investment purchases, you will want your credit score to be at 650. The higher your score, the easier it will be for you to be pre-approved for the loans you will need to make your purchases and start earning money from your real estate investments.