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Dec 31, 2023

How to Build Wealth through Real Estate Investing

Sponsored Content provided by Ea Ruth - 2022 President, Cape Fear REALTORS®

This article was contributed by Steve Mitchell, president of Cape Fear REALTORS®.

It is well known that real estate can be an effective strategy for building wealth, as the asset over time, has the potential to appreciate as well as generate monthly cash flow. Aside from the benefit of diversifying your portfolio, investing in real estate can offer a much higher return in comparison to other investment products, as it allows you to use debt to finance the property. Furthermore, tax statues for the most part, are favorable towards the purchase and sale of real estate investments.  

This is often referred to as the power of leveraging. There are many other benefits, such as having control over the investment and having the increased financial security provided by the inclusion of a hard asset in your portfolio.
 
Tax benefits set real estate apart from other investments. In many situations, it is possible to deduct the interest portion of the mortgage payment, plus expenses for repairs and maintenance. Also, the fact that real estate depreciates over time allows for another tax deduction. Also there is a possibility being able to sell the property for more than is invested in it, and using the proceeds to purchase a more expensive property, deferring the capital gains on the sold property through a like kind exchange known as a 1031 exchange. 

There are several ways to invest in real estate. Within the context of residential real estate, it’s possible to generate income by purchasing a single-family home, condominium or townhome and then renting it out. 

Those with an interest in commercial real estate could purchase a multifamily investment property such as an apartment complex, an office building, shopping center, hotel or warehouse. The investor can then choose to renovate the property and sell it, renovate, improve the rental income and refinance, using the improved property value pull some of the equity out, or rent the property in its current condition.

Regardless of which avenue you choose, you will want to begin building a team of trusted professionals and service providers, as the process can be extremely complex and highly nuanced. To ensure your interests are protected, it’s advisable to build a team with the following people: 

  • Bookkeeper and/or CPA
  • Real estate attorney
  • REALTOR®
  • Property manager
  • Contractor and/or home inspector
  • Service pros including plumber, electrician, landscaper, roofer, HVAC, etc.
There are a variety of loan products available to support your goals. Choosing one can also be extremely complex, so it’s critical to find a lender or mortgage broker to help you sift through your options. 

Similarly, researching a residential or commercial property to understand the viability of the investment can be very time consuming. Working with an experienced REALTOR® can help you avoid risk, save time and generate the highest possible return on investment.

To name a few, REALTORS® can help you understand HOA/POA covenants, deed restrictions, zoning and municipal ordinances. A qualified REALTOR® can also help you find out if flood insurance will be required, as well as whether there are pending assessments, environmental or eminent domain issues.

There are many other reasons why it pays to work with a REALTOR® when investing in real estate. To connect with an agent and get the guidance you need to achieve your goals, visit CapeFear.REALTOR or call 910-762-7400. 

Steve Mitchell is the 2023 president of Cape Fear REALTORS®, an organization with nearly 3,500 members who serve as the region’s Voice of Real Estate. Cape Fear REALTORS®, through advocacy, education, and community involvement, support efforts to protect the rights of property owners, promote the availability of housing, and provide resources to guarantee every individual has the right to share in the “American Dream.”  For further information on this topic and the association, please visit www.capefear.realtor or contact the Cape Fear REALTORS® at 910-762-7400.

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