Home » Real Estate

Potential Property Investors Have Many Options

Aug 24, 2008
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.

Property investing success doesn't happen by accident, though; you first need to know the nature of the business. And what is real estate, anyways? Read on to gain a better understanding of real estate, and the different ways in which you can invest.

"Real estate" is a term that refers to a piece of land and everything that sits on it, usually meaning structures. In terms of investment, its value is affected by local market conditions more than global conditions. There are several different ways to invest in real estate.

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.

The rental of vacation property is pretty self-explanatory. Your vacation property is one that is used for recreational purposes and is not your primary residence, the piece of property on which you live.

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.

Even raw or undeveloped land can afford the canny investor a chance to make money off appreciation on its value, and this type of investing also provides the aforementioned tax benefits.

Learning about each type of investing out there is a great idea, since it is up to you to determine which path will be the most advantageous for you personally, in light of your personal strengths and talents, in addition to what you want to gain. Whichever way you go, though, the decision to invest is a good one; as well as compounding your wealth, it keeps more of the money that would have gone to taxes in your pocket.

If you spend more than 750 hours each year on property investing, you should seriously consider becoming a real estate professional, as this will allow you to claim almost unlimited tax deductions, while not taking advantage of this opportunity will cost you deductions. To qualify for these enhanced tax benefits, however, (in addition to the previously mentioned 750-hour requirement) you will need to be participating in your duties as an investor, rather than hiring others to do everything for you.
About the Author
Author: Alexandria P. Anderson specializes helping people to find and purchase Eden Prairie MN real estate, as well as homes in Eden Prairie for her realty clients.
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