Tuesday, September 16, 2008

Potential Real Estate Investors Have Many Options

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.

In order to actually turn a good idea into money in your bank account, however, you have to know a little something about how the magic works. It is a good idea, for instance, to take apart this term "real estate." Just what is real estate, and what are the types of real estate investing that are open to you?

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.

Real Estate Investment Trusts (REITs) allow you to make money by investing in real estate, either by owning the properties themselves or by owning the mortgages on them, or to do a combination of both. The benefits of this type of investing are high yields and tax considerations. This is also a highly liquid type of investing, which means that it is easily converted to 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.

Another option is to put money in vacation property, property that you use for recreational purposes but do not live in (as living in such a property would make it a primary residence.)

Rental property is another common choice for those looking to make money in MN real estate. Everyone has dealt with landlords, so this type of investing doesn't take much explaining. Do, however, mind the differences between residential and commercial rental properties.

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.

Your needs and abilities will determine what sort of real estate investing will be most beneficial to you, so it is a good idea to familiarize yourself with each type. Regardless of which path you choose, the tax benefits associated with real estate investing will keep more money in your pocket.

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 Minneapolis Townhomes as well as Townhouses in Minneapolis in Minnesota.