After the 2008 market crash, it’s needless to say taking the plunge into buying a rental property is a scary thought. But buying real estate as an investment is one of the best ways to bring income in tax free, not to mention you can get other deductions, and it’s pretty easy to get the bank to back your investment. Read on for some other reasons on why home real estate has been one of the most steady investments in today’s market.
Buying your own home is an emotional journey that leads you to pick a place where you make memories, watch your children grow, and build a life. Buying a rental house is a calculated investment decision, not a sentimental one. In order to gain the most value, make sure it’s a property that has passes an inspection with flying colors, is not in a bad area of town, is not too close to busy roads or the airport, and is not a college rental property. These qualities all turn tenants off, or can increase insurance or lead to massive repairs that you’re responsible for. Vacation rentals take a lot of time to manage for fewer active weeks per year, and don’t even think about a fixer upper! A lot of new home real estate investors start with a duplex or house with a basement apartment. If you’re okay with sharing your home with a tenant, then this would be great for you, but with any property, make sure it’s up to code. Newbies to investing in real estate should partner with an agent who has experience in real estate investment. Search the MLS for reasonably priced properties that don’t require much to fix up, then go about acquiring a good mortgage.
While receiving a mortgage isn’t as easy as it was in the pre-recession de-regulated economy, buying a rental property is an investment that banks are fairly willing to back. By receiving rent for this property, you have income to pay off the mortgage, in addition to your regular income. You have to be sure you have enough money saved up to the point that you can either pay off the full amount of the property or you’re able to easily pay for a mortgage with rent payments, and have a fair amount of money left over.
Because you’re renting the property, you do not need to sell it quickly like you would sell your own house if you had to move out of the area. So if the market dips, you can hold on to a rental until you’re able to get a better price on it. A rental property also provides a good job for a trusted family member or friend, which can also save you money instead of a pricey property management company. Also, because of depreciation and deductions on mortgage interest, cash flow on the rental property should be tax-free.
Property taxes are something to consider when thinking about the additional costs of a real estate investment. However there are some tax deductions that will save you a fair amount of money in the long run. You can also apply tax-write offs against your other income. Depending on whether you’re classified as an active investor or a real estate professional, as well as what your income level is, you will also gain a bevy of tax deductions you can apply to your regular income. However, you should always discuss what these tax deductions would be with a tax professional before a real estate investment, so your expectations aren’t shot. Once you do purchase a rental property, many personal expenses can be turned into also tax-deductable business expenses. For example, a family member in college can manage a property. Travel expenses to check on this family member can be recorded as a business expense.
A tenant-landlord relationship is a finely balanced one, and so it’s tempting to go with a rental company. They will deal with any repairs, but will also cost you money. Being the landlord will be cheaper, but you will need good insurance and be ready to do any repairs, as well as have good relationship skills, so that your tenants are respectful and appreciative of everything you do for them.
Before a home real estate investment, you should always have a Roth-IRA and 401-K for saving in a more tax-friendly manner. But once you have taken these steps, a rental property puts you in the position where you are forced to save and be committed to maintain that property. Persevering with the property will pay off in the long run when you have a steady stream of cash flow to supplement your lifestyle.
Five years later after the beginning of the great recession, the real estate market is bouncing back. The Great Recession has, of course, been hard on all of us. And we’re not alone – the housing market has to also had to overcome some Afhigh foreclosure rates, its unstable aftermath, low consumer confidence, and a flood of high overall inventories that until 2013 were still at all time hights. In our present day, the doldrums of the recession are slowly fading away and real estate experts experts are again are showing signs of confidence in the housing market.
According to the National Association of Realtors, the median price of a St. Louis’ home is $165,900. That number is up over 6 percent from 2012, which also mimicks the spike in home prices that have been seen from across the US in the past three months. Trulia, the homebuyer website, reports that that now 58 percent of homeowners are thinking that it will take “10 years or less” to recover to the pre-crash peak; and 80 percent of current renters indicate that they are planning to purchase a new home someday.
Financial analysts are indicating that other factors helping the real estate market are:
But even with all this good news, is a house still the great investment it once was? One of the places where we can look for more guidance is local financial advisers and mortgage bankers. If you ask any financial advisor, they’ll say all types of things that echo the overall positive outlook. Mark Cooper of USA Mortgage says that “Homes can still be a good investment as historically, they appreciate over time; and mortgage interest and real estate taxes are deductible.” He also says that interest rates actually play a key role with all this. Even though we aren’t any longer at historic lows, the mortgage rates are still very good.
What about if you are looking to invest in land property? For those looking to invest in property, Mark Cooper say that you’ll need to have a stable income, good credit, and at least a 20-percent down-payment. Investing in land is also a great long term strategy because land values keep increasing over time while home values sometimes decrease over time.
The bottom line here is that, yes, real estate is a great investment because of the current state of the recovering market. The good news is that real estate investments isn’t rocket science. The simple mistake that most novice real estate investors make is that they buy a home for the wrong reason without “doing the numbers.” Following sound investment advice, from the beginning, is always best way to proceed with real estate investments.
The main thing to remember when starting out doing real estate investment is that buying a house and buying a rental property are two totally seperate things. To understand the difference, let’s look at what a “house” is and what “rental is. A house is where you live and raise a family. A rental property is how you plan to make money to help pay for the house and provide for your family.
When starting your search, be sure that you look beyond curb appeal. Real estate investing is really about looking at the numbers and financial potential. It’s never a good idea to pass up a potentially sound real estate investment just because you didn’t like it’s exterior or neighborhood setting. It’s always best to “focus on the numbers” and give the property a chance. Examine the property’s appearance only to the degree that it might impact the bottom line. One very suggestful real estate investor said: “Only women are beautiful, what are the numbers?” This mantra must become your way of thinking about real estate investment property if you plan to succed.
Come up with a plan with meaningful goals that frames in your investment strategy. Having meaning objectives is crucial for successful real estate investing. Here’s a few sample suggestions to get started:
Always do your homework before making any major decision. Invest your time to the valuable research. Learn as much as you can about rental property values, occupancy rates, and rents in your local market area. Checkout these valuable resources:
Everything about doing real estate investing is always about doing about numbers. When you invest in real estate and buy a house, you are literally buying cash flow. Because of this, it really makes sense to run the numbers on any rental property that you are evaluating before you buy the property. Also, don’t ever “just accept” the numbers that a home seller or real estate agent presents to you. Nay, nay, go deeper and get more information. One idea is to invest in real estate investment software that you can run anytime from your PC so that you can validate your own numbers. Your investment is, after all, your money. You don’t want your money to sit there uninvestment while someone else is telling you exactly which real estate investments are profitable. When you have your own data, your own numbers, you have more control. The more control you have on how your money gets spent, the better your chances are to protect it.
Of course, real estate agents aren’t “all bad.” Many real estate agents have proven themselves to be a valueable benefit to investors. Real estate agents can tell you about the local market conditions, discuss strengths and weaknesses about rental property, recommend properties that meet your investing objectives, and give you additional valuable information which will help you analysis. If you choose to work with a real estate pro, decide to first interview them and find about what they know about real estate investing. Are they actively involved with a real estate investment property? How well are they prepared to assist you with doing the numbers? Can they give you with own real estate analysis – something other they an analysis collected from another seller or listing agent? Lastly, gauge their motive. Of course, real estate agents are in the business to make a commission. We all know this. However, the last thing you want is to work with any agent who’s casting your financial interests under the bus and promoting their own motives. So choose wisely!