Real estate investing is a wonderful opportunity for many of our local homeowners, and it’s a great alternative to traditional investment vehicles.
There are many different options you can pursue to invest in real estate, but the two most popular are the “fix-and-hold” and “fix-and-flip.”
If you elect to fix and hold a property, you should ideally look for something that needs a little bit of an investment and will pay off in rental rates for however long you hold it. This is the perfect option if you’re looking for long-term equity growth and a property that will create income over the next 10, 15, or 20 years. Most of our clients do anywhere from three to 10 fix-and-holds, and by the time they reach retirement age, they have enough cash to allow themselves to reinvest that cash into more traditional investment vehicles.
Fix-and-flips are what people usually think about when it comes to real estate investing. The process goes something like this: You buy a rundown house, put some money into it, flip it, and make up the monetary difference. If you take this route, instead of taking that money out as cash, the better strategy for tax purposes is to reinvest it by doing a 1031 exchange.
With a 1031 exchange, you put that money toward your next investment property, which allows your equity to grow and grow for however many properties you decide to buy thereafter. At that point, you’re dealing with house money because the money you’re investing is money you made from another investment—not new capital you had to bring to the investment.
If you’re interested in learning more about real estate investing, it’s important that you work with a real estate team such as ours so we can advise you on the right strategies for every opportunity you come across. We’d love to consult with you to see whether real estate investing matches up with your life goals, so don’t hesitate to give us a call.
As always, if you have any other real estate questions, feel free to reach out to us as well. We look forward to hearing from you.