Historically low mortgage interest rates and rising home values are just a couple of reasons why investors may be drawn to real estate investing. Not only does real estate have the potential to provide a steady income stream, but it can help diversify an investment portfolio and act as a hedge against inflation.

If you are new to investing in real estate, there are a number of questions you should ask yourself to choose the best real estate investments for your needs.

Do you want to be an active or passive owner?

When choosing a real estate investment, you first need to decide how much you want to be involved. Are you interested in investing in a single-family dwelling, multi-unit property, or vacation property for rental income? Buying rental property and managing it yourself will involve time and effort unless you hire someone to manage it for you. If you've never been a landlord, be sure to talk with other landlords to get a sense of the potential rewards and pitfalls.

Other real estate investments, such as real estate limited partnerships and raw/unimproved land, demand less day-to-day involvement. If you're investing simply to diversify an investment portfolio, these types of real estate investments may satisfy your needs without the challenges of managing a property.

Are you investing for tax benefits?

There are a number of tax benefits associated with investing in certain types of real estate. For example, operating expenses for a rental property are typically tax deductible, and you may be entitled to deductions for depreciation. In addition, any profit from the sale of real estate is generally taxed at favorable capital gains rates. You may also be able to postpone your tax liability with other tax planning strategies, depending on the type of real estate investment.

Are you investing for income, capital appreciation, personal use, or a combination?

Real estate investments offer the potential for all three, but there is often a trade-off among them. For example, raw land may have development potential, but it likely will not provide any return until it is fully developed. You may be able to earn income from rental property that has the potential to increase in value over time, but your ability to use the property yourself will be limited if you want to enjoy a rental's tax benefits. Ranking your priorities can be useful.

Are you looking for a quick return or a long-term investment?

Real estate speculators have been known to earn high profits from buying distressed property, fixing it up, and reselling it at a profit, especially in a buyers' market. However, the real estate market is notoriously cyclical, and there are no guarantees. If you're speculating, hoping for a quick return on your capital, the liquidity of a real estate investment will be important to you; so will making sure you don't overpay to begin with. If you have a longer time frame, you may have a wider range of investing options.

Is real estate investing going to be a full-time job for you or a hobby?

Some real estate investors find that what they intended as a hobby or retirement diversion quickly becomes more than they can handle. Think about how much time and capital you're prepared to devote to your real estate investments, and how much of a cushion you have in case things don't work out as you expected.

This article was originally published by Broadridge Investor Solutions. Copyright 2019.

Want to know if real estate investment is the right move for your portfolio? Schedule a consultation with CUSO Financial Services Advisor Tiffany Yee by calling 626-389-3078 or emailing tiffany.cfsinvest@parsonsfcu.com .

Looking to buy a home? Get a mortgage from Parsons FCU to get the house of your dreams. Visit www.parsonsfcu.org to learn more.

*Non-deposit investment products and services are offered through CUSO Financial Services, LP ("CFS") a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS for investment services. Atria Wealth Solutions, Inc. ("Atria") is a modern wealth management solutions holding company. Atria is not a registered broker-dealer and/or Registered Investment Advisor and does not provide investment advice. Investment advice is only provided through Atria's subsidiaries. CUSO Financial Services, LP is a subsidiary of Atria.