Real Estate Investing: Is It Right for You?

Getting into real estate investing as a career seems easy and even glamorous when you see people doing it on television. The market can seem like an investor’s dream right now, and the high prices you see other people getting for homes they sell can tempt you into thinking its too easy to pass up. But there are practical concerns that come along with full time real estate investing, and you should consider them carefully before you make a career change.

Investors Need Capital to Get Started

To start a career as a real estate investor, you’ll need the funds to invest in a property. That might mean saving up the money to put in an all cash offer, but for many everyday investors, saving up that much money can be difficult. Another option is to get a mortgage to purchase the property. This will only require you to save enough money for the down payment, and if you rent the property out, the money you get from your renter can cover the mortgage payments. To get a mortgage, you’ll need to ensure your credit is in good shape and be ready to go through the underwriting process, where the bank will go over your finances with a fine-tooth comb to make sure you are credit worthy.

Rental Properties Can Be a Lot of Work

If you are planning to rent out your property, be prepared for all the work being a landlord entails. From advertising the property to vetting tenants and keeping them happy, having renters in your property is a lot of work. You’ll be responsible for regular maintenance and emergency situations that can occur with the roof, plumbing or HVAC. If you don’t know how to fix these items yourself, you might have to call a repair service each time these things happen, which can add up to a lot over time. You’ll need to have a robust emergency fund to deal with these issues promptly. If you wait too long to address the issues, you can face legal action from the tenants.

Taxes on an Investment Property Can Be More Than You Expect

If you fix up an investment property and sell it for a profit, the tax man will want a cut. This is considered a capital gain, and you’ll have to pay capital gains tax on the sale. To be sure you are paying the right amount, consider working with a tax professional or accountant who can advise you on how to prepare your taxes properly. There are also many deductions you can claim to offset the amount of tax you pay, so get expert advice as soon as you can to ensure you know what documentation to keep.

If you’re ready to purchase your first investment property, the Core Group can help. Click here to contact us and start looking for your first property.