Invest in Real Estate
Investing in real estate is one of the most fundamental ways for you to diversify your overly stock weighted portfolio. It can provide you with the perfect opportunity to control the success of your own investment. Buying and managing rental property is one of the simplest means for the hopeful entrepreneur to start a small business. The concepts are quite basic and the business plan can be just as simple. There are many factors that you will need to consider when evaluating what type of property is right for you. However, the key objective should always be the same: to find and purchase a property to be rented at a competitive rate that covers the operating costs. Over time, as the payments remain fairly constant but rents steadily rise, the profits can become significant. A property that pays for itself can yield huge returns over the long term and can provide its owners with an excellent stream of additional income.
Simply stated, this is the difference between the income that a property generates in rent and the expenses it takes to operate the property. It is the most desirable type of profit in real estate because it can provide you with an immediate cash return.
Tax Savings and Depreciation
Real estate investments have significant tax advantages. Any losses that a property incurs over the course of a year may qualify as a tax deduction. More importantly, even if your investment property ends the year with a break even or positive cash flow, you still may be entitled to a tax deduction. Investment property can be depreciated over time and the amount of depreciation taken in any given year may be enough to offset a positive cash flow, reducing the amount of tax you pay on that cash! Of course, everyone has their own specific tax situation, so it is always best to consult your tax adviser on how your investments will affect the amount of tax you will pay.
Equity build up
Most mortgage loan payments consist of two parts 1) a principle portion and 2) an interest portion. When you make your monthly payment the principle portion actually reduces the amount of your loan balance, which increases your equity in the property. In essence, your renters will actually be paying for your increasing equity and at the end of the loan term, the property becomes yours ‘free and clear?
This is the most well-known factor for making money in real estate. It is the increase in a property’s value over time due to economic changes such as increasing demand, decreasing supply of land and increasing prices due to inflation. Many investors believe that real estate is an excellent hedge against inflation based on its history of long-term steady growth. Another very important concept to remember in real estate investing is leverage. Leverage is the use of others people’s money in growing one’s own portfolio and is one of the most overlooked considerations amongst the general public. There are few other investments you can make in which someone else will actually loan you the money for the purchase. Consider an investment property that grows in value by 4% over the course of year from $100,000 to $104,000. If the investor purchased the property with only 10% down, a 90% mortgage, and seller paid closing costs, his cash invested would be $10,000. The general public would tend to view this property as yielding only 4%, without considering the impacts of leverage. However, we must remember that the investor’s true return is based only on the amount he contributed. The increase in value of $4000 divided by the initial investment of $10,000 yields a 40% return. Quite a difference compared to the measly 4% without our good friend, leverage. Of course this example has been oversimplified and does not consider cash flow, tax advantages, and loan principal reduction, which could potentially make the returns on this property even more favorable.
If investing in property is so great, why isn’t everyone doing it?
I don’t have enough money for a down payment.
Today’s mortgage market is amazing. There are lenders out there that will allow a borrower to buy an investment property with a minimal down payment. The use of creative financing can supplement the remaining sum needed for the purchase. We have the knowledge and experience to help you work with your lender to come up with a creative way for you to finance your investment property.
I don’t have time to look for investment property.
This is actually a valid reason preventing some from getting started. Finding good investment properties takes time and careful analysis. It is a game of numbers. You may evaluate many, many properties before finding ‘the one? After visiting several properties, you might find one that seems to be a great fit on the surface. However, through careful analysis the projected profits might turn out to be less than great. That’s where we come in! We know where to go to find the good deals that make your numbers work. We can help you locate the right property, evaluate its potential profitability, and negotiate a deal that drives you to success.
I don’t want to spend my weekends dealing with tenants and fixing toilets.
Are you saying you’d rather be spending time with your family & friends than arguing with difficult people and then cleaning up after them? We don’t blame you. We believe that everyone should have a strong balance between business and personal life. That’s why we work with property management service companies to help preserve your investment, while seeking a maximum return for you.
I need to learn more about real estate investing before I can start.
Late night infomercials and expensive courses on real estate investing are giving the industry a poor reputation. You shouldn’t expect to be sitting on the beach sipping margaritas while being interviewed about your $5 million net worth after only one commercial property. But after long term, steady growth, you should expect to build an additional stream of income that allows you to achieve the dreams and goals of your future. We can help to educate you on the tools and techniques of investing in commercial property. You don’t need to spend big bucks to become an informed investor.
Use your IRA to purchase real estate
Did you know that you could use your IRA to buy Real Estate? Well you can.
Did you know that you could use your IRA to buy a business? Well you can.
The Employee Retirement Income Security Act (ERISA) of 1974 essentially passed the responsibility of retirement savings from the employer to the employee. IRA’s were created in 1975 to provide individuals a chance to direct where their retirement funds were invested. Instead of stating which investments are allowed, the IRS code identifies which investments are not permitted under these laws. There are only two types of investments excluded under both ERISA and IRS Codes: Life Insurance Contracts and Collectibles (such as works of art, rugs, jewelry, etc). Refer to Internal Revenue Code Section 401. For more information about IRS Code section 401 click here.