Five Reasons to Invest in Real Estate in 2013

Is now the time to buy your first investment property? If you're thinking about it, you might not be alone. An estimated 250,000 first-time real estate investors will enter the marketplace in 2013.

There are a number of reasons for investors to look into real estate right now.

Let's take a look at the most compelling.

Housing Market Improvements

One reason for investor interest is that the housing sector has been improving. Existing home sales in January were 12.3 percent higher than a year earlier, according to the National Association of Realtors. The association adds that inventory -- the number of properties for sale at a given time -- was at the lowest level since April 2005.

"There are several schools of investment thinking," says Chris @REInvestor247 "One approach is to buy and quickly sell, while another is to buy and hold for the long term. Experienced investors sometimes do both, holding onto some properties while quickly turning over others depending on the individual property and their financial analysis."

A Hot Rental Market

Figures from real estate research firm Reis, show that at the end of 2012, apartment vacancies nationwide stood at 4.5 percent. That means that in many markets, it's tough to find a rental unit, important news for investors.

"With the loss of so many single-family homes to foreclosure during the past few years it's not surprising that the rental market has been strong," said Chris @REInvestor247 "Alternatively, new construction will absorb some demand and real estate remains a localized commodity. Because neighborhood and community market conditions can vary, it's important to speak with experienced and professional investors from REInvestor247.com regarding local investment options."

Multiple Financing Options

According to NAR, more than a quarter of all January existing home sales were financed with cash and investors are believed to account for most of those purchases. However, several forms of investment financing are available:

First, investors @REInvestor247 can obtain financing directly from Private lenders, hard money lenders and other financial institutions who offer such loans. In today's environment, Most Investors are paying cash and with money that is not even theirs… There is so many ways to approach Real Estate that most people don’t know. Everybody thinks that you have to go to the Bank and get a loan for it… of course, you’ll need a good down payment, solid credit and strong reserves for that strategy, in certain cases it's possible to buy rental units with FHA and VA financing.

"Both the FHA and VA programs allow borrowers to purchase properties with one to four units," said Chris @REInvestor247 "However, you can finance through the FHA or VA ONLY if you occupy at least one unit as your primary residence. Buying a duplex, triplex or four-unit property can be a good way to enter the real estate marketplace."

For those who qualify, FHA financing is available with 3.5 percent down, while VA (Veterans Only) borrowers can purchase property with nothing down. Closing costs are an additional expense, but eligible expenses may be added to the loan amount.

For Chris @REInvestor247, The best way to invest in real estate is when sellers "take-back" a mortgage and finance the transaction directly.

Some investors prefer seller financing, if they can get attractive interest rates and terms as part of the transaction.

New Rehab Opportunities

Many investors have traditionally sought properties which can be purchased, fixed-up and quickly re-sold. For some time, a 2003 HUD rule acted as a barrier to such transactions as it generally forbid FHA financing in cases where a home had been re-sold within 90 days of acquisition. While these guidelines were intended to stop illegal flipping, it was found that the 2003 HUD rule inadvertently punished legitimate investors and rehabbers. As a result, it has been waived until the end of 2014.

Potential Taxes Benefits

Investors, like homeowners, are generally able to deduct mortgage interest and property taxes. However, because investment real estate is a business activity, other deductions are available for such expenses as depreciation, management, repairs and association fees.

When it's time to sell properties held more than a year, investors can benefit from long-term capital gains rates, which are currently lower than short-term capital gains rates. In addition, rental properties in general may qualify for tax-deferred exchanges.

"The country is now engaged in a wide-ranging debate regarding taxes, spending and the deficit," said Chris @REInvestor247 "While it's possible that some rules will change, as a matter of policy we want a strong housing market that attracts investors. Given the importance of tax benefits -- and given the complexity of our tax rules -- investors should check with tax professionals to find out which specific deductions are available to them through investments in real estate."