Investing in a new real estate property can feel overwhelming, especially in the early stages. It’s hard to know what questions to ask when you’re not even sure what they are. After all, you don’t know what you don’t know. To help simplify your investment journey, here are the five top questions to ask when starting out with Montana real estate investments.
How can I make money with Real Estate Investments?
The first and most obvious way to make money with real estate investments is the potential for cash flow. When looking at a new property investment, consider what the cash flow potential is, how much it will cost upfront to get there, and how long it will take to see your cash back after the initial investment.
Distributions are the cash flow payments you can get with your real estate investments quarterly, semi-annually, or annually. Distributions will be different with every property and your asset management plan. If you want to optimize distributions, make sure you are purchasing a property that already has cash flows when you purchase, or is able to add value quickly to get it to cash flow.
Consider what the cash-on-cash return is for a property investment and whether you’ll ever get your money back. Some investments will be long term hold for appreciation that adds value for a cash-out refinance or sale of the property.
Are you in a financial situation where you can afford a long-term property investment, or do you need to see your cash back quickly? This rental property calculator can help crunch some quick numbers, or you can reach out to a local investor for more insight.
How does investing in Real Estate affect my taxes?
The top five deduction areas you can use to deduct tax expenses with a real estate investment are with your property tax, property insurance, mortgage interest, property management fees, property repairs (improvements & maintenance) and advertising expenses. You can use property depreciation as a tool to deduct costs of the property over time to reduce your taxes.
Another way to lower your taxes with real estate investments is by changing your income to passive or capital gains versus income tax. You can also lower your investment taxes by taking advantage of tax breaks by investing in properties located in “opportunity zones” and leveraging programs like the 1031 exchange by swapping one investment property for another.
What are the potential risks from investing in Real Estate?
Vacancies can lose property investors opportunity to maximize profit, and in some cases, can lead to loss. How can you work to prevent vacancies? For residential properties, commit to understanding the market well, or hire a property management company who does. For commercial property investments, we recommend building a strong relationship with a commercial real estate broker.
Strong property management systems play a crucial role in maximizing your property’s profitability. A professional property management company can help you streamline your systems to keep your rental property optimized in high demand to avoid losses without the burden of your time.
Additional risks to consider for Real Estate investments include market downturns that lower the demand for rental properties. Market fluctuations and inflation can make investors nervous, but it’s actually a smart time for real estate investing. Learn more about making a profit during inflation in our blog post here.
Who should I invest with?
Ideally, a real estate investment company should have experience in the local market you’re looking to invest in. Local investors have a better understanding of the area’s trend’s and nuances. This is important because you cannot always predict a market based on national trends. For example when the 2007/2008 recession hit Billings, Montana, economic growth decreased from approximately 3% to .5% but never had a loss compared to most places in the United States with significant loss.
Bigger doesn’t always mean better when it comes to your real estate investments. Oftentimes, large corporate firms tend to add on unforeseen charges & fees for their own gain. Always ask yourself: will this company have my best interest in mind, or theirs?
How can I find trusted investment management?
Your best case scenario is to find an investment company with a built-in professional property management service. The initial excitement of investing in a real estate property can wear off quickly once you realize how much it is to maintain and manage. You don’t want to add new properties to your plate if you don’t have time to manage them well.
You can get a good feel for a company from the first impression of their website. Do they have proof of past client success? Ask about client success stories and look for testimonials or case studies on their website. A great property management company will offer high value through blogs, free resources, and free consultations. When choosing a company to invest with, see if they’ll show you value before you show them your credit card.
Billings, Montana Real Estate Investments: The Blackarc
Put this list of questions to the test and schedule a meeting with us! How can we help you maximize profits by investing in real estate? We’ll strive to show you value before you ever show us a credit card.
“When my husband and I were first stepping into investing, I’d sit in on the meetings with my notepad and then have to Google all of the terms and acronyms later. I didn’t have a clue what they were talking about. We needed guidance. Finding a partner to mentor, educate, and lean on made our investing dream a reality.“ — Blackarc Investor