FIVE FINANCIAL BENEFITS OF OWNING RESIDENTIAL REAL ESTATE INVESTMENTS
“Important factors to consider when choosing a real estate market for single family rental property investing include population and employment growth and home value appreciation. When buying single family rental properties located in a different city or state, investors also research purchase prices, taxes, and housing regulations.”
such an approach:
the Equity/Bond Markets, where you can have daily ups and downs of up to 10 percent. 5. Tax advantages Tax credits are available for low- income housing, the rehabilitation of historical buildings, and certain other real estate investments. A tax credit is deducted directly from the tax you owe. You also get an annual deduction for depreciation, which is typically a percentage of the value of the property that you can write off as an expense against revenues. Finally, in some countries, the gains from the sale of real estate can be postponed indefinitely as long as the proceeds are reinvested in other real estate, known as a 1031 exchange. Important factors to consider when choosing a real estate market for single family rental property investing include population and employment growth and home value appreciation. When buying single family rental properties located in a different city or state, investors also research purchase prices, taxes, and housing regulations.
percentage of the population that are renting. For instance, D.C., New York, and California have the most renters
1. Leverage If you pay 10 percent to 30 percent as a down payment, a bank, lending institution or private party will provide the rest of your funding. That means you can own a $100,000 piece of property for just $10,000 to $30,000. 2. Cash flow If purchased and managed properly, your property can offer long-term positive cash flow, and this ongoing stream of income you receive from an investment offers other benefits — see below. 3. Appreciation If the value of your property has gone up, and you decide to sell, your profit is called appreciation. Cash flow and appreciation are two forms of revenue from rental properties. Remember, even though you aren’t buying in hopes of selling to earn a quick profit, you should always have an exit strategy in place. 4. Fewer highs and lows A cash-flowing property is not subject to the daily ups and downs of the markets. It is typically a longer-term play — as opposed to paper assets or
in terms of percentage of the population. Another important
consideration is that you want to use the 1 percent rule, which means that the monthly rent generated is at least 1 percent of the sales price of the home. For example, if you have a house worth $250,000, you want to be able to generate around $2,500 per month in rent. This is going to eliminate a lot of areas of the country — in particular coastal California, New York and even some middle-America markets such as Denver, Colorado.
Glenn Hamburger CFP® is an Orange County lifelong resident. He a Senior Director with Banc of California Private Banking located in Newport Beach. All of the opinions in this article are his personally and do not necessarily reflect those of Banc of California.
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JUNE 2018 | ATTOM DATA SOLUTIONS
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