How does one go about investing in real estate? Investing in real estate is much more than buying personal property. Often, the best strategy when investing in real estate is to invest in properties with the intention of renting them out. Below are several reasons to invest in rental properties and an examination of how and why to invest in foreclosures.

Appreciation

1031X offers that appreciation is just one reason to invest in real estate. The general trends in the market place exhibit growth in value. In other words, the inherent value of the property increases due to additions, the surrounding areas, or simply market trends. In today’s market, property rarely depreciates in value, but it can.

Income

Rental properties also offer a steady income. Sure, there are the occasional leaks and cranky tenants, but at the end of the day, rent can accrue a sizable annual income.

Depreciation

In this instance, depreciation refers to accounting and tax laws. In the cases that property depreciates or if repairs are needed, this is considered a non-cash expense. In other words, depreciation allows real estate investors to reduce taxable income without affecting actual income.

1031 Exchanging

1031 Exchanges allows investors to invest money from the selling of one property into the purchase of another property without taxation. This mainly applies to real estate and does not apply to stocks, bonds, or other intangibles.

Foreclosures

There is also the beauty of investing in a foreclosure. Foreclosures are often priced to move, or in other words, priced to sell quickly. The banks want their money, and that’s about it. Most foreclosures are sold “as is.” In other words, banks do not offer to repair any aspects of the properties. And sometimes, homeowners that go into foreclosure do not leave on good terms. There have been cases of homeowners ripping out the kitchen sinks of their homes, stripping the wallpaper, or even taking their mobile home with them! Needless to say, they can be major fixer uppers. But with the right supplies and a little bit of extra cash, foreclosures can be excellent investments.