Real estate investing can be an effective way to create financial stability, as well as build wealth over time. But investing in real estate as a married couple can be a tricky business. Managing joint finances, emotions and expectations is challenging. However, with the right approach and strategy, it can be done successfully.
In this article, I’ll discuss five tips for successfully investing in real estate with your spouse that can help you grow your wealth and strengthen your relationship at the same time.
Set Clear And Realistic Goals
The first step for married couples looking to invest in real estate is to set clear and realistic goals. Both of you should get on the same page about what you want to achieve through your investment. For example, if you had your heart set on a newly built short-term rental by the beach but your spouse was hoping for a downtown fixer-upper to get his hands dirty, you may not be aligned. Taking the time to discuss and build upon a joint vision of your investment plan is a crucial first step.
Goal setting can help you stay focused, stay motivated and move toward a common vision. But set financial goals that are achievable and realistic for your current circumstances. For instance, if you’re looking to buy a rental property, make sure you fully understand the property’s potential rental income and expenses to ensure it will be a good investment for you both.
Any successful relationship requires good communication. This is especially true in real estate investing. Make sure you communicate openly and honestly with each other about your expectations. It’s important to avoid making assumptions and instead, ask questions to clarify any doubts or misunderstandings.
For example, although the numbers on a fixer-upper project may seem enticing to both of you, it is important to understand exactly how each of you plans to spend time working on the property. You don’t want to end up being the couple that fights over who will take time to take care of a property. If spending time rehabbing a property is not something that either of you look forward to, then maybe a turnkey property would be a better option.
If you’re feeling overwhelmed or uncertain, don’t hesitate to seek outside advice so you can move forward with making informed decisions.
Divide the investment responsibilities, such as research, analysis, financing and management. This will help avoid conflicts and disagreements, and ensure that you both play an active role in the investment process.
When dividing roles, make sure to work to each other’s strengths and weaknesses. For example, if one of you is good at managing finances, let that person handle the financial aspects of the investment.
Create A Clear Plan
It’s essential to create a clear plan outlining the details of your investment, including the property type, location, purchase price, financing options, loan terms and expected returns. The plan should be a road map that you both can follow to achieve your shared goals.
Make sure to document everything in writing and have a strong understanding of each other’s role. For example, investing in short-term rentals can come with some pretty significant tax savings. By spending the right number of hours and doing the right activities, you may even be able to strategically create some tax losses and offset your W-2 or other income. But who will earn these hours, and how will you document it? These are things to work out ahead of time so you have a clear plan of attack.
Should any changes be made along the way, be sure to communicate them with each other and adjust your plan accordingly.
Don’t Forget About Tax Deductions
As you may know, real estate investing comes with a ton of potential tax-saving benefits. When you invest with a spouse, it can help turn more of your personal expenses into legitimate business deductions.
For example, signing up for a real estate conference to take your investing to the next level? Investing with your spouse means they can travel with you on the trip. In addition to the amazing quality time you will have, you can take business write-offs for the trip.
Whether it is more write-offs for business trips, real estate education or fun times shopping for your rental furniture, tax savings are often amplified when you invest as a couple.
Investing in real estate with your spouse can be an exciting and challenging experience. But by following these five tips, you’ll be able to navigate the complexities of real estate investing together and achieve your shared financial goals. Just remember to set realistic goals, communicate effectively, divide responsibility, create a clear plan and keep potential tax savings in mind all the while.