Building wealth through real estate is one of the most common ways people generate sizable assets. Knowing where to begin can be challenging, especially if you are new to the industry. In this post, we take a look at some of the strategies that you can use to significantly increase your wealth through real estate investing. Here’s what you need to know.
Maximize favorable tax advantages
The first thing you want to do is look at the tax code and run through all of the ways you can maximize favorable tax advantages. Going beyond standard deductions for property taxes and mortgage interest, there are plenty of other ways to offset your rental income. For example, many savvy investors utilize depreciation. Provisions like Section 179 allow immediate deduction of the cost of qualifying business equipment or vehicles used to manage your portfolio. These additional deductions are helpful if you run a property business because it makes the enterprise similar to a conventional business where you’d be able to deduct these costs normally.
Use turnkey rental properties
If you have a lack of time or desire to oversee extensive renovations, but you have plenty of capital, you could opt for turnkey properties to invest in. Turnkey properties are exactly what they sound like. They are rental properties that are ready to go in every sense of the word. The maintenance, construction, letting documents, and even tenants are all taken care of for you. You simply buy the property with the tenant in place, and then you receive the income stream from it.
This option is preferred by people with large portfolios who don’t want to worry so much about property management. Many people would rather just go straight into a property and start renting it out without any additional hassle.
Invest passively with REITs
Investing passively with REITs is another option, especially if you’re looking to build wealth over the long term and you want to minimize risk. A REIT is a real estate investment trust that buys a bunch of properties and then divides them into small bundles that you can buy as a regular investor.
REITs are essentially companies that own, operate, and finance income-producing real estate, and you can become a part-owner of that value. REITs usually pay out a fixed dividend every month, providing you with a stable source of income.
Master house hacking
Another thing you could look at doing is mastering the art of house hacking. This is one of the ultimate strategies for aspiring investors. Before buying a multi-family property like a duplex or a triplex, you can live in one unit while renting the other. What’s nice about this approach is that the rental income you receive from your tenant usually covers the cost of the entire mortgage. This is essentially a way that you can live for free, so you can save money for your next deposit on a property. You can also build your equity at the same time and refinance later if you need a cash lump sum.
