Interested in Real Estate, but you are Self Employed.
Self-employed and want to get into real estate?
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Millions of Americans are on their way to being self-employed. It’s both the original, and future American Dream. However, years of industrialization and new threats mean more financial challenges for the self-employed or small business owner. Can self-employed and small business owners get active into Real Estate? The answer is yes, with some challenges.
Financial Challenges of Being Self-Employed
It is difficult to pinpoint just how many self-employed individuals there are in America. Data ranges from 1 in 10 workers to as many as 89 percent of executives in different fields being self-employed. Today, this runs from the local business owner, to independent contractors, freelancers, full time real estate investors and agents.
What most share is a lack of consistency in income. Even at the top end, some may have a multi-million-dollar month, followed be a completely dry quarter. This makes it so difficult to budget that many don’t even bother. And this creates many other issues.
New data from a TD Ameritrade survey shows the self-employed woefully under prepared for retirement. Around half of Americans only have about $28,000 saved for retirement. A large amount of Americans have less than $1,000 in net-worth savings. Certain life events and challenges could wipe out much of these savings well before retirement.
Over a quarter of small business owners say that rising healthcare costs have reduced their ability to save. More than a third say these costs have hurt their businesses already. Higher taxes negatively impact most small businesses and consumers of the small business.
Higher wages, and new interest rate hikes are on the horizon. More than half of the self-employed say higher rates will cause them “hardship.”
A new Wells Fargo study rebuts the common mindset that people can just keep working until age 70 if they haven’t saved enough for retirement. We know we are living longer, but so far that doesn’t appear to have dramatically extended our ability to work longer. Thirty-seven percent of today’s retirees say they couldn’t work any longer due to health issues. Almost a quarter had to leave the workforce due to employers. Just seven percent of those that managed to retire early say they had enough money to do it.
Real Estate Solutions
Real estate investment is a sound cure for many of the financial challenges facing the self-employed. Many self-employed individuals face barriers to entering real estate investing or purchasing properties due to the lack of access to mortgage loans. So how can these hurdles be overcome?
Thankfully, mortgage loans for the self-employed are coming back, if borrowers know where to look. Many homebuyers and owners report being shut down as soon as they tell banks that they are self-employed. Fortunately, there are options. Other mortgage companies are again offering stated income loans, accepting non-traditional sources of income and income verification, as well as providing asset based loans.
Buying and investing in property through an existing or new business entity can provide a great advantage to those who know what they are doing. Due to stringent Dodd-Frank Act regulations, many lenders have moved to funding investment and business real estate loans. That’s great news for the self-employed. Find solid deals, build equity, gain cash-flow, and eliminate business overhead.
Passive income investments in real estate can also keep producing cash and building your nest egg, even during the low cycles of active purchasing and selling. The consistent cash-flow will supplement and is great strategy for retirement planning.
The self-employed can also fight back against taxes. As a business owner, you can be qualified to contribute far more to retirement plans to reduce tax liability each year. Some of these plans even pass that benefit onto other employees. Roll those dollars into a self-directed IRA and you can use them to invest in real estate while retaining the tax deferred and tax-free perks of a regular 401k or IRA. Gain more tax deductions with nonprofit efforts that also boost the local community, and your local real estate assets.
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