Investors

Be Prepared

Before taking the plunge, there are important factors you need to consider. In addition to financial stability, you need to honestly access the level of involvement you’re able to commit to and understand the benefits and potential pitfalls of investing in real estate.

Credit History

When you invest in the stock market, no one checks your credit rating or looks into your financial background. That’s not the case when investing in real estate. If your plan is to invest directly and purchase an income property by obtaining a mortgage, you’ll need to check your credit rating. Ideally, your score should be 740 or above and your total debt including future mortgage payments should be no more 43% of your gross income. Otherwise, you may not be able to get a mortgage and if you do, you will end up with a higher mortgage rate. You will also need to have enough saving for at least a 20% down payment, 25-30% if you want to avoid purchasing private mortgage insurance.

Asset Availability

You may be considering investing in real estate on a larger scale by becoming part of an investment partnership. You will first have to learn how much the initial investment is and decide if you are comfortable having that amount of your savings tied up. The investment partnership will also be considering your financial history when evaluating your potential as a partner. Keep in mind, real estate is more appropriate as a long-term investment. It doesn’t normally sell as quickly as stock or a mutual fund.

Property Management

When it comes to property management, there are really only two choices. Hire someone to manage it or do it yourself. Of course, the return on your investment will be larger if you do it yourself, but you need to be realistic when making this decision. Will the time you spend on property management interfere with your lifestyle. Can you truly devote the time necessary to do it properly? And do you really want to? If not, you still need to maintain and protect your investment, which means you need to hire someone.

Tax Benefits

Depending on your tax bracket, there are a variety of potential tax benefits to investing in real estate. It is strongly recommended that you consult with your accountant or tax professional when making a real estate investment. They will be able to explain which tax benefit you qualify for and also ways to reduce the amount of taxes your investment income may be subject to.

Risk Tolerance

Everyone’s tolerance for risk is different. Those considering a real estate investment should have a fairly high tolerance. Many people think real estate is a low-risk investment. If not well researched and properly managed, you could face the same risk as investing in the stock market. Like any investment, real estate has its pros and cons. It’s important to understand the risks upfront before making an investment.

There are numerous types of investments to choose from when adding real estate to your portfolio. Our team of experts can guide through the process of choosing the perfect real estate investment to help you achieve your goals.

Residential Real Estate

Investing in residential real estate normally involves homes and apartments that are leased as residential dwellings. It can also include real estate that has an integrated service business such as a senior assisted living facility or a luxury apartment building with a full-service concierge team. The lease terms for this type of real estate can vary but are normally valid for one year. This allows for a quicker, more cost-effective adjustment to market conditions than some other types of real estate investments.

Commercial Real Estate

This type of investment predominantly consists of office buildings and professional spaces. These typically involve long-term leases, valid for many years. Fully leased commercial real estate with long-term tenants can provide a steady and consistent income, even if the lease rates on comparable properties declines. By the same token, if comparable rates increase, that income could end up being significantly lower than the current market value.

Industrial Real Estate

Similar to commercial real estate, industrial properties can include storage units, warehouses, distribution centers and manufacturing facilities. This type of investment can provide a stable and predictable source of income. They also typically involve lower operational risks and fewer capital expenditures than some other investment properties.

Retail Real Estate

Another investment option is retail space such as shopping centers, strip malls, or conventional malls. This type of real estate can house a variety of tenants including merchants, salons, restaurants and more. The lease terms for these properties sometimes include a percent of the tenants’ revenue. This will not only increase your income but allow you to make upgrades to increase the property value and make it more appealing to consumers.

Multi-Use Real Estate

This type of investment property could include any combination of the previously mentioned option. For example, you could invest in a large building with retail space on the first level and residential or office space on the upper levels, providing a diversified investment for your portfolio.

Partner with Professionals

As with any real estate transaction, it’s vital that you work with experienced professionals when investing in real estate. The Freeman Group has the knowledge and expertise to handle any type of investment, whether it’s a single income property or an entire development project.

So, if you’re ready to take the leap and add real estate to your portfolio, let’s talk. We’re certain our team can provide you with a variety of investment opportunities and help you make the best choice for achieving your specific goals.