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How to Make Money From Your Real Estate Investments (2019 Update)

When new investors first look into how to make money from real estate investment, they often get bombarded with a lot of seemingly conflicting advice. The “experts” all have different opinions, and there’s no room for any varying investing techniques or methods. With so many “right” and “wrong” ways to make money with your investments, all of which seem to contradict each other, it’s easy to get overwhelmed.

Fortunately, when you break the process down and understand that there are actually a lot of different options and opportunities to profit from real estate investing, it becomes a lot simpler and a lot more straightforward. Let’s take a look at just a few of the ways that you can profit from your investments without making a career out of it.

Find Passive Investment Opportunities

First of all, a lot of investors view REITs (real estate investment trusts) as beginner investment opportunities. Granted, you do not have a lot of control over where your money goes when you buy shares in an REIT, but when you choose the right trust, you’ll be almost guaranteed that the investments they make on your behalf will be profitable. This, in turn, will guarantee that you see positive returns on your investment every quarter when you receive your equity payout.

In addition to REITs, you can also make money by joining a real estate investment club and/or investing in projects on real estate crowdfunding platforms. With a real estate investment club, you’ll be able to network with other investors and real estate professionals, and you’ll have opportunities to invest in exclusive equity deals that the club offers. With a real estate crowdfunding platform, you can pick and choose properties to invest in, and you can choose to invest as much or as little as you want, giving you more freedom to manage your investment portfolio.

All of these opportunities are extremely passive, as they all involve the purchase of equity, rather than the direct purchase of property. You will never have to concern yourself with finding tenants or maintaining these properties, as you would with a direct, individual purchase. However, that’s not to say that directly owning real estate is a bad way to make money, either. If you are going to go that route, though, you’ll want to find ways to make your investment as passive as possible.

Buy Turnkey Properties

One good way to make sure that your investments are more passive than active is to buy turnkey properties that come with a property management firm in place. The best turnkey deals not only include property management, maintenance, and repairs, but they also include tenant acquisition and will take care of all of the day-to-day tasks associated with rental properties.

Turnkey properties do tend to cost more than properties that are not move-in ready with property management and tenant acquisition services, but consider how much time and money you’ll save when you purchase an investment property that is ready to start making money immediately. Instead of worrying that you put more into this investment at the front end, think of how much more time you’ll have to find more investments and continue to grow your portfolio.

Don’t Pay Your Mortgage Down – Buy Another Investment Property Instead

Speaking of new investments and portfolio growth, this final tip for how to make money from real estate investment is a bit counterintuitive. You might think that you’ll make more profits faster if you have the opportunity to pay off the mortgage on an investment property. However, it’s a much better idea to put your extra income into another investment and to collect income on both of these at the same time.

If you do this, you’ll have two properties appreciating over the long term, instead of one. Plus, you’ll be getting monthly cash flow on both, and both mortgage payments will be taken care of with rental fees. What you “lose” in interest, you’ll more than make up for in appreciated value and more income.

These are just a few of the ways you can make money from real estate investment. Follow these tips, and you’ll almost certainly watch your wealth grow.

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What’s the Best Way to Manage Your Real Estate Portfolio? (2019 Update)

As you begin to grow and diversify your portfolio with real estate investments, you’re going to hear a lot about asset management, the types of assets you should add, and the best form of management to increase your wealth. As with most aspects of investing, the best solution seems to be a combination of solutions. Instead of solely investing in one type of asset or the other, and instead of subscribing strictly to one form of management or another, it’s best to have both passive and active assets in property management. Furthermore, you’ll get more out of your investments if you implement a combination of passive and active management styles for different parts of your portfolio.

Asset Management vs. Property Management

First of all, before we go any further, we need to clarify the difference between asset management and property management. Property management is a service that takes care of the regular tasks and hassles of your rental properties for you. A property management firm will take care of collecting rent, maintaining and repairing the property, staying on top of late fees, evictions when necessary, and they may also cover tenant acquisition and/or paying property taxes and other bookkeeping services, as well.

Asset management is a bit more abstract. This refers to the management of the assets in your portfolio. Asset management involves making decisions on what to sell and what to hold, what percentage of your portfolio should be in real estate and what percentage should be in stocks and bonds, etc.

When we talk about active asset management, we’re referring to a form of management that relies on manipulating your holdings and assets to gain more ROI by taking advantages of market inefficiencies, dips, and peaks. On the other hand, with passive asset management, you’ll keep an eye on your assets, but you’ll generally let them accumulate returns on their own, according to the market, instead of trying to gain more than apparent market value.

Passive Income with Active Asset Management

It’s important to be familiar with both property management and asset management, as you want your real estate investments to be passive streams of income for you. With good property management, you can collect returns on your rental properties without actively maintaining them.

At the same time, not all real estate has to be a passive asset. Thanks to real estate investment trusts (REITs), real estate investment clubs, real estate crowdfunding platforms, and other equity investment opportunities, you can have active real estate assets in your portfolio. In fact, depending on the market and your portfolio, you may have an asset that’s both a passive and active asset in property management.

What do we mean by that? Basically, you may buy shares in an REIT and maintain it as a passive asset that doesn’t need active management, but market activity may make it more profitable to treat those shares as an active asset to be held or sold to gain more capital that you can then put into another asset.

If you directly own a rental property, and you don’t intend to make being a landlord a full-time job, it makes no sense to make this an active asset or to actively manage it. You should be only as involved as choosing a good property management company to ensure the most income from the property for you, and it should sit in your portfolio as a passive asset with no active management.

However, the funds you gain from that rental property may need more active management, especially if you want to continue to grow your portfolio. Thus, you’ll need to determine what percentage of your portfolio should be allocated to real estate and, of that, what percentage should go to passive or active assets. Then you can more easily determine which types of investments to allocate your returns toward.

With just a little bit of attention, organization, and management of your portfolio, you can set yourself up with a great balance of investment properties that will grow your wealth while providing stability for your more active assets.

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Deferring Taxes on Real Estate Investments (2019 Update)

Real estate has long been a highly profitable investment. Ask any financial expert, and they’ll likely recommend investing in real estate to stabilize and diversify your portfolio. Rental properties also bring in passive income and can grow your wealth and begin showing a return on your investment almost immediately upon purchase.

This is why real estate investment groups are such in-demand organizations. A reputable group can help you invest your capital in lucrative properties by pooling your resources with those of other group members. By joining a group like this, you gain access to real estate and investing expertise, as well as much larger potential benefits and ROIs (returns on investment).

Real estate is not simply a good investment because it tends to appreciate over the long run or because it is a good diversifying element in your portfolio, though. It also presents a number of means to defer taxes, as well. Did you know, for example, that real estate trading can help you delay paying capital gains taxes on an investment property?

How Real Estate Trading Works

Forbes likens real estate trading to baseball cards. When you were a kid, you may have traded several cards that you found less valuable for a single card that you believed would gain significant value over the coming years. When you bought the cards, you paid sales tax on them, but when you traded them with one of your friends, neither of you paid the IRS a dime, right? Though the process is not quite as simple as going to a friend’s house with a box of trading cards, the same can be done with investment properties through a 1031 exchange.

Basically, according to the Chicago Tribune, if you’ve purchased an investment property that has accrued a significant amount of equity, you will likely want to use that equity to purchase more investment properties. However, if you sell the property outright, you will owe capital gains taxes, which will eat into your liquid assets and limit the amount of money available to invest. However, if your property qualifies, you can perform a like-kind 1031 exchange for another property (or properties), and you will not owe any taxes until your new properties sell.

Exchanging Property for REIT Shares

If you’re interested in joining a real estate investment trust (REIT) and you currently own property independent of any real estate investment groups, you may actually trade that property for shares in your REIT in a 721 exchange. This is particularly good for investors who want to take advantage of the benefits of working with an REIT and who want to take a more hands-free approach to real estate investment. Be aware, though, that after a 721 exchange, you may not exchange your REIT shares for real estate under a 1031 exchange to defer your capital gains tax again. Fortunately, a good real estate investment group will help you understand all of your options before you join so that you can decide whether to hold on to any existing properties you own or whether you’d be better served by trading them.

There are actually numerous ways to defer paying capital gains taxes when you invest in real estate, but without expert advice and guidance, you may never know about all of your options. Trading is only one means of putting off paying the taxman, and you can see from the information we’ve shared here that even this single means offers several options and strategies.

If you’re looking for an exit strategy for a property you own and you do not want to pay taxes on it yet, getting involved in a trade with a reputable REIT may be the way to go. Then again, you may be better served by retaining that property and enlisting the aid of a real estate investment expert to help you determine the best course of action for future investments. A good REIT or real estate investing company can help you make the best decisions for your portfolio.

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How to Identify Good Investment Opportunities in Dallas? (2019 Update)

With a growing real estate market, the Dallas-Fort Worth area is ripe with investment opportunities. From foreclosure sales and flip properties to turnkey rental properties, you can’t seem to throw a rock in north Texas without hitting a chance to invest your capital in real estate. However, not every deal is a good one, and not every deal fits every investor, either. So, how can you identify the best Dallas investment opportunities for you and your goals?

Location, Location, Location

First, whether you’re perusing the MLS or someone in your real estate investment club has clued you in to what they call a great investment opportunity, you have to find out where it is. With nothing more than the property’s street address, you can gather everything you need to know about the neighborhood and surrounding area.

Through the tax assessor’s office and public records, you can find out about how many houses in the area are vacant and whether the neighborhood is growing or shrinking. With a quick drive around the area, you can find out if it has easy access to amenities like public parks, grocery stores, schools, and other attractive elements.

Whether you intend to sell the property quickly or hold onto it as a rental, you should know how much rental rates are in the area and how much comparable properties are selling for. You should also find out the average time that a property stays on the market there, too. Finding out that prices are low, people are moving out, and houses stay on the market for months should be enough to let you move on to your next investment and never look back.

Condition of the Property

Next, if at all possible, you’ll want to take a look at the condition of the property. With foreclosures, you will likely not be allowed inside before auction. However, with short sales and other distressed property sales, you can often do a walk-through before you make an offer. At this point, take the opportunity to have a professional come with you to inspect the property. After a full inspection, you should have a good idea of how much the property will need in repairs and renovations.

The property may still be a good deal, even if it is in need of major repairs. However, without knowing the condition of the house, you could easily overpay for it and turn a great opportunity into a terrible deal in very little time.

Understand How The Property Fits With Your Investing Plan

Finally, as you look around Dallas for investment opportunities, keep your investment plans in mind. Purchasing a unit or shares in a new construction apartment building can be a great investment move if you plan on holding onto the property as a rental, gathering passive income, and waiting for it to appreciate. However, it’s not going to gain you much (if any) capital if you try to turn around and flip it in a few weeks or months.

Foreclosure Real Estate Investing DallasBy the same token, a foreclosure property in need of a number of repairs may not give you enough income in rental fees to justify the expenses you put into renovating it. However, those renovations could bring that property back up to market value and create a great opportunity for a short-term investment.

Also, keep in mind how comfortable you are with the risk level on any investment. As a rule, holding properties and renting them to tenants is a much lower risk investment; fixing and flipping properties as quickly as possible is a much higher risk investment. Both have their advantages and disadvantages. Flipping properties can gain you a lot of income very quickly, but comes with more risk and more work. Holding properties, hiring a property management company, and renting them out will gain you less cash flow and a slower rate of return, but you will also have a much lower risk with each of your investments.