There are a lot of options for investing. And one of the most popular choices amongst many high net worth individuals and family offices is real estate. Despite current interest rates being historically low, the real estate market, like all investments, carries some risk. It also experiences ups and downs. But if you know what you’re doing and you understand the market, you can get a great return on your investment by betting on real estate.
One of the biggest questions regarding real estate investing is where should you invest? The adage; “location, location, location” has a lot of merit, but there are numerous factors to consider and every situation is different. So, it’s important to research population and economic growth, property demand, and housing prices, etc., then let your research determine where to invest your personal or family office wealth.
Important Factors In Real Estate Investing
- Time – this is one of the most important factors in deciding where to invest in real estate. Not everyone has the same amount of time to wait for a return on his or her investment. Additionally, you need to factor in how much time you actually have available to spend on your real estate ventures. If you don’t have a lot of time to dedicate to learning about investing in real estate, then choosing a real estate exchange-traded fund (ETF) or a real estate investment stock (REIT) may make the most sense for you.
- Capital – obviously, money is always a factor in investing. How much money you have available to invest will play a huge role in how you invest. Investing in real estate will require money, credit worthiness or both. Any advice to the contrary should likely be avoided altogether. However, if your available investment capital is less than ideal, then REITs and ETFs are good options. If you have disposal income, then investing in commercial real estate (CRE) could be an option. This is one of the most expensive real estate avenues, but CREs can also provide the biggest returns.
- Knowledge – you don’t have to be an expert to invest, but investing does take some knowledge. And of course, the more knowledge you have, the better off you’ll be. So if you’re not yet an investing scholar, it’s time to do your homework and learn everything you possibly can about the real estate investment you want to pursue. This way you can make an informed decision.
- Risk – as mentioned earlier, any investment involves risk. And real estate is no different. Are you a risk-taker? If you prefer to play things safe, then again REITs and EFTs are a safe bet for you. If you like to walk on the wild side of things, then individual investments or single-tenant properties might be your cup of tea. There is always risk, but it will vary depending on the type of investment you choose.
- Goals – Ask yourself, why am I investing? What do I want to achieve? Do you want to save for the future, generate rental income or are you looking for quick cash or a flip? Whatever the reason, once you know your goals, you’ll be better able to choose where to invest.
Once your primary goals are addressed, you can then determine the target market that best fits your specific needs, abilities, time available and acceptable risk; taking into consideration the area’s population and economic growth, property demand, projected housing prices, etc. to help you decide. If your tax or financial situation is complicated and you need additional help, we strongly suggest contacting your current tax professional. Honesty and integrity in business is essential, and the more objective your research source, the better.
If however, you’re in the market for a new, trusted tax and family office advisor (we never sell investments), please consider contacting us here at Info@GROCO.com. Or, visit our website at www.GROCO.com to learn more about us. Unfortunately, we no longer give advice to other tax professionals.
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