What Is an Investment Property?
An investment property is any real estate (land, buildings, or both) you purchase yourself or invest in with a partner for the purpose of monetary gain. You may hope for a return on your investment by generating rental income, generating land use income, or eventually reselling. These assets can be managed by an individual, a collective, or a corporation.
Investing in real estate can be both a long-term venture where you hold the property for years or a short-term venture where you spend less than a year flipping a property. With the latter, buyers purchase properties with improvement plans in mind, followed by immediately selling at higher prices.
Interested in finding a property in South Mississippi? Contact our team.
Residential Investment Properties
Investing in residential properties can be a great way to generate residual income. From single-family homes to condos, apartments, and townhomes, a diverse residential portfolio offers the potential for long-term returns that are apparent in both tenant income and property appreciation.
Duplexes, Multi-family homes, and vacation rentals are other popular types of residential real estate that offer lucrative returns. If steady cash flows and tax breaks for rental or flip properties excite you, a residential property could be your best investment.
Land Investment Properties
Investing in land can greatly diversify your portfolio, especially if the land has potential to become a development lot for commercial or residential builds that will generate heavy cash flow. Vacant land (land not being used) is attractive in markets that have high projected growth and appreciation, as you can do whatever you want with it as long as it meets applicable zoning requirements.
Another popular type of land investment is timberland. If owning forested land for recreation, hunting, or passing down to your kids appeals to you, investing in timberland could be ideal.
Benefits of Investing in Real Estate
Tax-Exemptions
Real estate investors can take advantage of a 1031 tax-deferred exchange, which means you can postpone paying taxes on the profit you make from selling your property if you reinvest it in something similar.
You’ll have a total of 180 days to close and then 45 days post-close to find a replacement property for this “like-kind” exchange. These rules are located in IRC Section 1031 as laid out by the IRS. Note that a 1031 is NOT tax-free but simply tax-deferred, and you must report a like-kind exchange to the IRS via form 8824.
Asset Ownership and Control
Investing in a property can bring great freedom. As its owner, you have complete control to modify the space or land according to your needs without requiring anyone else’s permission other than local governance.
Owning a property also means you are building your net worth, as this asset type has a positive relationship with the United State’s GDP. So, as the economy grows, real estate demand grows along with your property’s value. Now you have a net-worth-building asset that you can (1) control freely and (2) diversify your portfolio with lower risk.
Long-Term Cash Flow
Long-term financial security through consistent cash flow is arguably the main reason why people invest in real estate. Investors can reap the rewards of consistent monthly rental income from leasing to tenants or by engaging in a land lease.
Financial Methods for Buying Investment Properties
When considering an investment in residential property or land, starting the financing process as soon as possible is essential. Most properties require a large down payment teetering around 20% of the purchase price, so save up those funds accordingly. The bigger your down payment, the lower your monthly payment, and the less likely you are to foreclose if income projections fall short.
Buying a property outright in cash is typically ideal. Using cash suggests greater competitiveness when bidding on desirable investments, particularly during seller’s markets!
If you’d rather not use cash, a line of credit or loan provides access to large amounts of capital. Credit scores prove integral throughout qualifying and receiving loans. Great credit may give access to reduced payments with lower interest rates, potentially saving thousands of dollars on interest alone.
Where to Find Investment Properties in South Mississippi
Investing in real estate or land can be lucrative, but which path is right for you? You may consider flipping the property, or becoming an owner-landlord to enjoy steady cash flow once tenants move in. We encourage you to weigh all factors carefully before taking action, and choose whichever option best fits your financial goals.
To help you get started down the road to success, McMillan Land & Realty offers an extensive selection of properties that could fit your needs perfectly! Take advantage of our expertise and browse through our list today to find your investment property in South Mississippi.
