Here at Jones Aur Commercial Real Estate, we have seen a lot of questions from first-time investors. What are my options? How do I finance? What even is real estate investment?
We’ve seen those and a whole lot more, too. It kind of comes with the territory when you’re one of the mid-south’s most established and profitable commercial real estate investment firms, and hey – we love getting the chance to answer them!
Setting the Scene – What Is Real Estate Investment?
This one may seem basic, but you might be surprised by how often this simple question comes up! And it’s a great question since before you can master something, it’s necessary that you have a deep and thorough understanding of the basics.
So in that spirit, let’s talk about what real estate investment is at its simplest. Simply put, it’s all about wealth creation! By buying properties to sell them off at a higher price or allow them to accrue value over time, investors like you can tap into a range of financial benefits. Real estate investment is such a fantastic strategy because it offers multiple income streams, like rental income from tenants or profits from property sales. Also, real estate investments have the potential for long-term value appreciation. That means you get to build equity over time, and that’s one of the most powerful benefits of real estate investing.
What are the Tax Advantages of Real Estate Investment?
There are a bunch of them! Real estate investment offers many unique tax benefits to investors, especially when investment is paired with smart management and cultivation of your properties. By investing well in real estate, you can enjoy benefits such as:
- Depreciation – This is a big one. Since the IRS allows property owners to deduct a portion of the property’s value as a depreciation expense over its useful life, you can see substantial benefits if you invest correctly. This deduction is based on accounting for the wear and tear of the property and can lead to some significant tax benefits. Depreciation can have the tremendous benefit of reducing taxable income so that you owe less in taxes when all is said and done.
- Mortgage interest deduction – If you finance your investment properties through mortgages, you can deduct these interest payments from your taxes. This applies to residential and commercial property and allows you to reduce your tax liability and optimize your revenue stream.
- Property tax deduction – one great tax benefit of real estate investment is the ability to deduct the property taxes of any rental properties owned. Property tax, in general, is a big thing to keep in mind when it comes to real estate investment, but it’s important to remember that deductions can lighten the load considerably!
How Much Money Do I Need to Get Started?
Great question! And the answer is, perhaps a little frustratingly, it depends. Everyone has different limits regarding the initial investment, and everyone’s portfolio will be structured differently, requiring greater or lesser starting costs.
When getting started in real estate investment, you’ll want to look at factors such as the type of property, location, financing options, and your personal investment goals. It’s possible to get started with a range of budgets, from small-scale investments in single-family homes to larger commercial properties. Exploring different investment strategies and consulting with professionals can help determine the most suitable investment amount.
This is a big one when it comes to partnering with an established firm like Jones Aur that can guide you through the process!
Should I Be Investing in Commercial or Residential Properties?
Another great question! The answer is that it really comes down to the individual. You have to ask yourself – what are my goals from an investment? Am I interested in managing a property long-term, or would I rather see a quick turnaround for my money? How tolerant am I of risk? What is my understanding of the market conditions of the area?
Now a lot goes into each of these questions, but there are some general guidelines to follow when it comes to answering this one. First off, residential investment tends to be a little easier to get started into for most investors, as it usually involves smaller initial investments, fewer tax and regulatory standards to follow, and less specialized knowledge of market conditions.
That being said, there are certain circumstances where it is more appropriate to start with commercial investment. For instance, perhaps you’re highly knowledgeable in the business occupied by the space or that you plan to occupy the space with. Or maybe you have a particular insight into the market of that area. Again, it’s all about you, your interests, goals, and skillsets.
Luckily, Jones Aur is a highly-specialized firm with an in-depth understanding of the commercial real estate market in and around Memphis, so if you are looking to get started with commercial, you’ve found the absolute best resource for you!
You’ve Got A Friend In Jones Aur!
We hope you’ve gotten a bit better perspective on some of the ins and outs of getting started in real estate investment with this FAQ. But we also know there’s no way we could possibly answer all of your questions; that’s why we’re ready and waiting to take your call! Ring us up at 901-538-6363 for our Memphis office or 501-301-0109 in Little Rock, or better yet, just fill out this form, and we can get back to you asap!
Whether you have a specific property in mind or just want a partner with the know-how and the resources to supercharge your portfolio, you’ve got a friend in Jones Aur!