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Investment
Home Homebuyers
What are the tips to successful Real Estate
Investing?
Statistics show that most American’s, upon
reaching retirement agent, did not save enough
money to live a comfortable retirement lifestyle
that is similar to the income and lifestyle they
enjoyed during their working years. If you
started early enough, you can enjoy living in
your home mortgage free and investing in a home
of your own provides you with a sound real
estate investment in its own right. However,
what if you need to have steady cash flow coming
in at all times and your retirement savings,
401k plan, Social Security and other sources do
not provide sufficient income? Consider real
estate investing as a sound strategy for your
long term cash flow needs. It, over time, has
proven to be a safe investment, that offers tax
advantages, leverage, and income. It is a “long
term view” and is not to be viewed as “quick
cash” with quick turn around times. Best of
all, you do not need a lot of money to be a real
estate investor. It uses the concept of “OPM”,
using “Other People’s Money” , i.e: leveraged
and borrowed money, by which to create steady
cash flow and wealth for yourself and your loved
ones.
Lower Your Taxes
Tax incentives for real estate investors can
often make the difference in your tax rates.
Deductions for rental property can often be used
to offset wage income. Tax breaks can often
enable investors to turn a loss into a profit.
For which items can investors get tax breaks?
You could claim deductions for actual costs you
incur for financing, managing and operating the
rental property. This includes mortgage interest
payments, real estate taxes, insurance,
maintenance, repairs, property management fees,
travel, advertising, and utilities (assuming the
tenant doesn't pay them) These expenses can be
subtracted from your adjusted gross income when
determining your personal income taxes. Of
course, these deductions cannot exceed the
amount of real estate income you receive. In
addition to deductions for operating costs, you
can also receive breaks for depreciation.
Buildings naturally deteriorate over time, and
these "losses" can be deducted regardless of the
actual market value of the property. Because
depreciation is a non-cash expense -- you are
not actually spending any money -- the tax code
can get a bit tricky. For more information about
depreciation and various tax alternatives, ask
your tax advisor about Section 1031 of the U.S.
Tax Code.
Have a Positive Cash Flow
There are two kinds of positive cash flows:
pre-tax and after-tax. A pre-tax positive cash
flow occurs when income received is greater than
expenses incurred. This sort of situation is
difficult to find, but they are usually a strong
and safe investment. An after-tax positive cash
flow may have expenses that outweigh collected
income, but various tax breaks allow for a
positive cash flow. This is more common, but it
is generally not as strong or safe as a pre-tax
positive cash flow.
Regardless of what kind of real estate you
choose to invest in, timely collections from
your tenants is absolutely necessary. A positive
cash flow -- whether it is pre-tax or after-tax
-- requires rental income. Be sure to find
quality tenants; a thorough credit and
employment check
is probably a good idea. Please see our
services under the Landlord Page, where for a
small fee, we will do some of the screening work
for you.
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