You are considering investing but are not sure which type of investing is the best for a novice and carries the least amount of risk. Of all the types of investments, you can make as a beginner, one of the best to invest in residential real estate. If you are not sure if this type of investing is the best option for you, here are a few of the many reasons that you should put your money into residential real estate.
Increased Leverage
One of the biggest opportunities available for real estate investors is to leverage the real estate they purchase. Basically, when you leverage real estate, you use the equity in the homes you own to purchase another home. For example, if you place a certain percentage of money down to purchase a home and pay a monthly mortgage, you can use the entire equity of the home to purchase more real estate.
This is a great way to get started if you want to purchase homes that you want to flip or if you want to invest in rental properties. Typically, all you will need to get started is a good credit score and the money to put a down payment on a residential property.
Possible Tax Breaks and Deductions
Another benefit of investing in residential real estate is the opportunity to secure tax breaks and deductions. For instance, if you own any rental properties, the money you put into the property, including property taxes, repairs, mortgage insurance, and insurance can all be deducted from your taxes.
Additionally, if you flip a home and sell the home for more than you paid for it, you will not pay traditional taxes on the sale because it will not be considered income. Instead, you will be taxed at a lower rate because the money you make will be considered a capital gain, rather than income.
Consider Investing in a REIT
Finally, if you like the stability that comes with investing in residential real estate but do not want to be responsible for flipping houses or renting apartment units, investing in a REIT is a great option. REIT, or real estate investment trust, is a way to invest in a real estate firm that owns several properties. You can enjoy the benefits of a great return on investment without actually having to care for the real estate properties yourself.
From the benefits of a REIT to the potential for tax breaks and deductions, there are several reasons to invest in residential real estate.
For more information, contact a company like NP Residential.
After thinking long and hard about what to do with my living situation, I finally made the decision that it was time to buy a house. I was tired of living paycheck to paycheck because of rent, so I began working with professionals to guide me in the right financial direction. I was able to find a great company that offered exactly what I wanted to learn, and they walked me through the financial aspects of home ownership. Within a few short months, I was living in a gorgeous new home that I absolutely loved. Check out this blog for great advice on home ownership.