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Three Real Estate Investing Secrets You Must Know

There are several ways to invest in real estate, including buying REIT equities, Real Estate Limited Partnerships, and single-family duplexes. In all cases, you want a steady, tax-advantaged cash flow with the potential for long-term growth but without the market volatility. Our portfolios require genuine diversification, just like that. In addition, as the Federal Reserve pulls us out of this low-rate environment, real estate can act as a hedge against inflation. During periods of inflation, rentals increase, which increases the property’s cash flow. When you purchase a bond, the yield is fixed, and your cash value decreases.

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However, real estate investing needs you to be proactive, as opposed to stock investing, where being passive and selecting low-cost mutual funds or ETFs is the ideal method to create the largest profits. No one else will advise you to add real estate to your portfolio, therefore you must be fervent in your desire to do so. You already know how to analyze a real estate transaction; you just need to understand how to do it independently. And in order to take advantage of the special tax advantages provided by real estate, you must pick which sort of real estate investment best suits your personality and how you will invest. Invest in real estate once you’ve determined that it satisfies your demand for consistent cash flow and offers the possibility of appreciation.

Here are just a handful of the numerous real estate investment techniques we’ve learned over the years that can help you take control of your portfolio and remove the mystery surrounding real estate investing;

Overcome your allies:

Often, your hired and reputable advisors (broker, wealth manager, tax accountant, etc.) may advise you to completely ignore real estate in your portfolio. They frequently cite the same worn-out justifications, such as “illiquidity” or “too much managerial intensiveness.” They may have merit depending on your particular circumstances, but that isn’t the actual reason they want you to steer clear of real estate.

You don’t pay stockbrokers to invest in real estate. They have no incentive, no commissions, and no work to do. That is, unless they want you to buy a pricey non-traded REIT; in that case, you will immediately understand their genuine motives.

Elementary school arithmetic:

Although it’s common knowledge that real estate is a numbers game, you might be astonished to hear that you already possessed all the required knowledge from elementary school. You only need a few crucial formulas to decide whether or not to pursue a possible investment, and nothing will be more challenging than long division. You’ll have the numerical skills necessary to successfully underwrite real estate investments once you’ve refined these ideas.

Use a taxable account:

Real estate is eligible for tax benefits from the government, so there is no reason to try to avoid paying taxes by investing through an IRA or 401k. The cash flow you receive from your real estate investment might not always be what the IRS deems taxable income, especially in the beginning. Depreciation and amortization are non-cash charges that significantly lower your taxable income yet have no effect on your cash flow.

A diversified investment portfolio should include real estate, especially for retirees. By giving yourself the right tools to assess transactions and the self-awareness to pursue real estate investments even when others advise against it, you will take control of your financial future.

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