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What Type of Property Investing Is Right for You? September 17, 2008

Posted by minnesotarealty in Minnesota Homes for Sale.
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Everyone knows that investing in property is a lucrative opportunity for enterprising people to make money. The advantages of entering the Minnesota real estate business include paying less taxes and being able to make more money without actually lifting a finger.  The prospect of putting your money to work while you sit back and relax is certainly a tempting one, and this is why so many seek a piece of the action.

Striking it rich as a real estate investor doesn’t happen overnight, though.  One needs to learn the ins and outs of the business, learning everything there is to know about real estate.  A good place to start is to simply ask, what is real estate?

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.

Investing in an REIT or a Real Estate Investment Trust means that you are the owner of either parcels of real estate, mortgages on pieces of real estate, or some combination thereof.  This type of investment has quite a high yield along with some tax benefits, and its liquidity means that you can easily convert it into cold, hard cash.

A partnership in real estate is just what it sounds like; investors may elect to partner with other people or organizations in building new structures, or making money off extant ones. Appreciation is another great source of profit for property investing partnerships, even when you’re dealing with undeveloped land.  Tax benefits and growth potential make forming a partnership another great option for investors

The rental of vacation property is pretty self-explanatory. Your vacation property is one that is used for recreational purposes and is not your primary residence, the piece of property on which you live.

Rental property is another common choice for those looking to make money in 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.

Learning about each type of investing out there is a great idea, since it is up to you to determine which path will be the most advantageous for you personally, in light of your personal strengths and talents, in addition to what you want to gain. Whichever way you go, though, the decision to invest is a good one; as well as compounding your wealth, it keeps more of the money that would have gone to taxes in your pocket.

If you spend more than 750 hours each year on property investing, you should seriously consider becoming a real estate professional, as this will allow you to claim almost unlimited tax deductions, while not taking advantage of this opportunity will cost you deductions. To qualify for these enhanced tax benefits, however, (in addition to the previously mentioned 750-hour requirement) you will need to be participating in your duties as an investor, rather than hiring others to do everything for you.

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