Real estate is a great way to invest your money. There are many opportunities within the real estate world whether you are buying for the short term or the long term. Today’s focus is going to be on buying for long term investments.
Why invest in real estate?
Simply put… the rate of return, tax advantages, and to build wealth.
When you plan to invest for the long term (buy & hold), you’re minimizing your risk. Real estate values will always increase over time. The longer you hold, the more money you will make. You don’t need to just take my word for it, look at the trends. Even with the crash in 2008, home values are even higher than they were pre-crash. The housing market has always recovered.
Not to mention the tax benefits from owning a home and/or investment property is huge. You can get tax deductions on mortgage interest, property taxes, insurance, cash flow from investments, operating expenses and some others as well.
What do I buy?
You can literally start anywhere. That’s the beauty of it! If you’re just getting started investing, you may or may not have a huge chunk of change to put down on a duplex or anything larger. If that’s the case for you I’d suggest starting with a Single Family home.
Why a Single Family Home
There are a couple options here.
- You could stick with the traditional single family home & maybe rent out some of the other rooms in the house. This will help you with the mortgage and help you to save up a down payment quicker for your next investment! Once you’re ready to buy the next one, you can rent the full house out and a portion of the rents can be used to help you qualify for the next place. The beauty of single family homes is there are always renters for them and they appreciate well.
- You could also go the ADU route. With the new ADU Laws effective Jan 2020, you have the ability to build an additional unit on the property AND a junior unit (JADU). The cost to build is cheaper than the cost of purchase. This would allow you to live in any one of the 3 units, and rent out the other two. And because you will be occupying the property, you have the ability to put down a lower down payment.
Either way would be a great place to start building your wealth. Whether the economy is strong driving home prices up or the economy is weak, driving more people to rent, your investment is winning in one way or another.
Now, if you’ve got a little extra cash, multi-family housing might be the route for you. This could be a duplex, tri-plex or something larger. The benefit to owning a multi-family over leasing a single unit is that you’ll have the money from the other rented units, to off-set any vacancies or unexpected repairs.
If you would like to talk more in depth about how long term investments can work for you specifically or want to sit down and crunch some numbers shoot me an email or text and lets get the process rolling!