Dos and don’ts of real estate investing

Being the owners of real estate is a mission for many investors. If handled well, investing in real estate can give individuals many benefits, including capturing long term capital gains and the ability to diversify their income. If you are considering investing in real property, you need to keep these dos and don’ts in mind before you begin.

Do: Invest if you have cash flow

If you have a strong cash flow, do consider investing in property. The unique factor about real estate is that it needs a lot of money upfront. As you may know, down payments of more than 20% are very common.

As one of the top realtors in Guelph will tell you, when it comes to traditional investments like stocks, it’s easy to sell some to make some quick money. This doesn’t apply to real property as it is not possible to sell just a room unless you’re renting. There are also the chances of prolonged vacancies and repairs.

Do: consider tax advantages

It is possible to deduct taxes, insurance and interest against the income of the property. Deducting depreciation from your taxes is also possible. In the eventuality that you sell a rental property, you can roll the gains over to other rental properties without having to pay capital gain tax.

Do: Gain information and knowledge

Becoming a real estate investor hardly requires a college degree. However, investors who are new to the game must be armed with knowledge about the various aspects of real estate investing including future trends before they take the plunge. It is best to read books, blogs and guides about managing, owning, buying and selling investment property, before you begin.

One way to get the required knowledge is by talking to someone who has already invested in real estate property. They will be able to guide you regarding the ins and outs of investing in property and share some of their experiences with you.

Do: Check your finances

One thing that intimidates most investors is finance. So before you jump into the deep end, check your finances. Make sure your credit score is good and find out which is the best avenue to explore if you are considering a loan. Conventional bank loans are very common where beginners are concerned.

Don’t: Do a hurried job on your investment portfolio

There is no arguing that a diversified investment portfolio is a necessity, however inexperienced investors must realize that only after they have gained some experience in investing should they consider this. While owning one rental property is okay, going for multiply investment properties is a whole new ball game.

Check your financial status thoroughly before you consider buying more properties. In the long run, you would need a professional property manager to do your work for you and this is not cheap.

Don’t: ignore your tenants

To succeed in real estate investing, finding good tenants is very important. To find the best tenants, screen your tenants thoroughly. You need tenants who pay rent on time; keeping damage to your property to a minimum. Background checks like credit score, references and interviews will help.

After you have done your homework properly, there is no reason why real estate investing cannot work for you. With the right management, you can reap generous rewards from this venture.