How to Make Money in Real Estate Investing
The Real Estate Bubble-when Will It Burst?
More and more individuals are realizing that real estate is much safer, and a better return on investment than many traditional investment vehicles. Unlike stocks or bonds, real estate investments can usually be liquidated in order for the investor...
How to Make Money in Real Estate Investing
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
Real Estate Deals - Ten Myths
Are high-profit real estate deals only for the wealthy? Is it possible to buy with no money down? Do you really have to know the "right" people? Let's answer by looking at some of the myths of real estate.
1. The good real estate deals are...
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.
One of the most important factors in determining a solid investment is the amount of equity you are purchasing. Equity is
Choosing A Reputable Real Estate Appraiser
When you are considering purchasing a property; either for investment or personal use you will need to hire a real estate appraiser. If you are financing the purchase through your credit union or another financial institution will most likely be...
the difference between the actual worth of the property and the balanced owed on the mortgage.
Benefit from Growing Equity
While investing in real estate is relatively complex, it is often worth the extra work. When compared to other financial investments, like bonds or CD's, the return on investment for real estate purchases can often be greater.
The key to real estate investing is equity. Determine an amount of equity that you want to achieve. When you reach your goal, it's time to sell or refinance. Determining the proper amount of equity may require the assistance of a real estate professional.
(c) Copyright 2005 Madan Ahluwalia. All rights reserved.
About the Author
Madan “Raja” Ahluwalia is an Attorney at Law & Realtor. Raja offers his clients a counseling-based approach to home buying, where the client’s long-term goals are the most important consideration. He possesses a thorough understanding of the market and trends, based on years of involvement in real estate. He provides expert insights and helps clients understand timing, pricing and financing issues. Contact Raja at email@example.com or 650.430.4023.
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