Rental Property Investing
Rental property investing starts sometimes with getting experience from buying your residential house. Getting financing from banks using your good credit score are the pre-requirements for investing in real estate.
Sometimes you inherit a property and it makes sense to convert it into a rental property until you decide to sell when the seller market is coming back.
Here are few good tactics for investing money or just investing your time and energy to make money:
Investing in your residence. Tactic #1
Buy your residence new and unfinished. Fix it up in your convenient time and sell after having it as your residence for two years. New developments appreciate faster when landscape is in place and contractors are gone. The capital gain is not taxable up to $500,000 for married couple and $250,000 for single. Do it over and over, building your own net worth. You may never need to manage rentals or become a real estate agent.
Rental Property Investing. Tactic #2
Buy rental and hold long term. The advantage is cash flow! Someone else is building net worth and paying the debt for you. You get the full use of depreciation.The disadvantage is the responsibility of being a landlord.
Rental Property Investing. Tactic #3
Buy rental and hold long term as a business. Become a real estate agent, start your small business, and at tax time subtract from income the qualified business expenses. Get your losses on paper to offset the earned income from your job and enjoy a federal tax refund.
By qualifying yourself as a real estate professional , you offset now more than $25,000/ year in business losses from joint earned income.
The beauty is, you pay taxes after you subtracted the qualified business expenses (travel, car, computer, etc). It is legal. Know the rules of the game, get a good accountant and start a management property business.
Flip Properties. Tactic #4
Buy and quickly flip for profit. What if it is not selling quickly?
This risk is not for me.
In the same category are all the exotic flips, auctions, sales, and foreclosures. What you see on the internet sometime is only “noise” – out of real – estate web sites, where books and e-books are marketed intensely.
Nobody gets rich by buying just one property, making some improvements, selling and paying taxes 30% for $10,000 capital gain, if all goes well.
Some people are so scared by property management that flipping properties is all they see and comprehend.
By contrast, it is so easy to buy a rental and milk the rents for a while and eventually sell the house to your current tenant at the right time. But it involves property management.
Rental Property Investing. Tactic #5
Rent your property to someone else with the option to buy. You may offer a land contract if the bank financing is not available.
Land contract require accurate accounting and an attorney review for all your contracts.
If you make it wrong, the risk is, you may be forced to recognize the gain without yet receiving the money. This is the case, if the sale is at the beginning of the transaction.
You make money when the tenant defaults on the land contract and the property comes back to you, may still in good condition. This transaction stinks to me. I mention it here just for information.
Investing in Land. Tactic #6
Land Develpoment. Done right, you can make a lot of money. This is a big team business. Consider financing, development, marketing, and the associated risk.
Meanwhile, you do not have a tenant helping you to make the payments.