In his Rich Dad book series, Robert Kiyosaki trumpets the benefits of investing, especially those of real estate investing. Those include tax benefits, and the ability to have your money go to work for you without your lifting a finger. It sounds wonderful, doesn’t it? The idea that you can turn a dollar into two just by placing it in what can seem like a magical realm can seem very enticing.
Striking it rich as a real estate investor doesn’t happen overnight, though. One needs to learn the ins and outs of the business, learning everything there is to know about real estate. A good place to start is to simply ask, what is real estate?
Well, real estate is made up of parcels of land, and includes any structures built on said land. The prices you will pay for pieces of real estate are largely dependent on how the local market is faring. As an investor in real estate, you will find ample opportunities to pay less in taxes than others would. In regard to exactly what type of investing you will do, you have quite a few options.
Investing in an REIT or a Real Estate Investment Trust means that you are the owner of either parcels of real estate, mortgages on pieces of real estate, or some combination thereof. This type of investment has quite a high yield along with some tax benefits, and its liquidity means that you can easily convert it into cold, hard cash.
In a real estate partnership, you are pairing with another investor or group of investors. in order to make money from existing structures or to build new ones. You can even make money off the sheer appreciation of undeveloped land itself. This is a good bet because of high growth potential and tax benefits.
Purchasing and renting out vacation property is another option for investors. A vacation property is distinguished from a primary residence in that renters use it for recreation, as opposed to living in it year-round.
We’ve all had dealings with landlords at one point or another in our lives, and potential real estate investors have the opportunity to become landlords by purchasing rental properties. Nothing too complicated here, but be aware that there are some differences in renting space to businesses and renting out residences.
You may also invest in raw, or undeveloped, land.
It is a good idea to learn about each type of real estate investment to determine which yields the greatest benefits, determined by your particular needs. Kiyosaki named tax benefits as a good reason to become a real estate investor. After all, money you keep in your pocket is just as good as money earned.
If you are particularly interested in pursuing real estate investment because of tax benefits, you may even wish to become a real estate professional, as the IRS allows people who spend at least 750 hours a year on their investing duties to have nearly unlimited tax deductions. If you are not considered a professional, and your salary is high, that can actually cost you deductions on your real estate. You must have the time to participate in your real estate activities yourself, even if you have hired another real estate professional, to qualify for all tax benefits.
Author and Realtor Alexandria P. Anderson helps clients to find and purchase real estate in Maple Grove as well as Maple Grove property in Minnesota.