How to Move from the Stock Market to Real Estate Investment
The stock market is not a place for the faint of heart or small investors who can’t afford to lose the limited money they have to work with. The stock market is too emotionally driven, and the constant fluctuations and manipulations have made it difficult for some investors to trust. As a result, many people have cashed out of the stock market and looking elsewhere to invest their money.
The result is that many are open to exploring real estate investment as their wealth creation of choice. If this describes your situation and you are in fact exploring real estate investing (perhaps for the first time) as a wealth builder for years to come than here are some important things for you to consider. They will help you develop an investment strategy.
1) Consider taxes – Bear in mind that you want to keep as much as possible from what you make on the investment. What you keep after expenses and taxes is your true return on investment. So think about how you want to own the properties—personally or as a holding company—because the benefits of a proper tax structure will be substantial as you build your portfolio and eventually decide to cash out for profit. In this case, consult with both an accountant and a lawyer for advice.
2) Consider what and where to buy – First, you must decide on the type of real estate investment you want to buy—land or income property. In this case, income-producing property is recommended because, if purchased correctly, the property can generate a cash flow and put a steady stream of income into your pocket. Moreover, it will provide you some tax shelter benefits to help offset the income you might be earning elsewhere. Secondly, you must decide where you want to make your real estate investment—locally or elsewhere. In this case, connect with a knowledgeable real estate agent in your area of choice and let him or her help you find the right properties.
3) Consider leverage – Think about buying the most amount of real estate with the least amount of your own money. In other words, avoid putting a hefty down payment to acquire a small mortgage on a rental property if you can invest less of your money and acquire a greater mortgage. Again, choose a real estate agent that has the experience and knowledge about financing to assist you.
Real estate investing can make you wealthy, but no real estate investment should ever rely on guesswork. Foremost, develop an investment plan, and then surround yourself with knowledgeable professionals that can help you put it into action.
Author: James Kobzeff, January 25th, 2010
