Investment Property

How to make money investing in real estate?

• Appreciate Value: Despite all the ups and downs of the real estate market, most properties will increase in value over the long term.

• Rental Income: Owning and renting out property is a great way to make additional income without a lot of effort. However, keep in mind that dealing with renters can be frustrating and time-consuming. Do your homework before leasing the property to someone.

• Be mindful of different taxes:

  1. Capital Gains Tax: Capital gains tax is a levy assessed on the positive difference between the sale price of the asset and its original purchase price.
  2. Short-Term Capital Gains Tax: Short-term capital gains tax is a tax on profits from the sale of an asset held for one year or less. The short-term capital gains tax rate equals your ordinary income tax rate — your tax bracket.
  3. Taxation on Rental Income: Rental income is taxed as ordinary income. If you're in the 22% marginal tax bracket and have $5,000 in rental income to report, you'll pay about $1,100.

How do I determine whether a property is a good flip versus a rental?

1. Do your homework on the current and future housing market predictions.

2. Determine your overall running costs, such as your estimated monthly payments and utility cost.

3. Determine your work timeframe and maintenance strategy.

4. Know your demographics. What is your target demographics looking for in space, sq. footage, and price.
5. Finally, what are your overall profit needs and timeframe? Are you looking to make a quick profit, or are you looking for a long term second income?

What are my options for financing if I dont have all the cash up front?

• Mortgage Refinance: You might also consider a cash-out refinance to tap some of your home’s equity. Lenders will generally let you borrow enough to pay off your current mortgage and take out more cash, usually up to 80% of your home’s value.
• Home equity line of credit: A "HELOC" is another way to borrow against the the value of your home, but unlike a refinance, it doesn’t pay off the original mortgage. Instead, you get a line of credit — usually up to 80% of your home’s value, minus the amount of your home loan.
• Home equity loan: A home equity loan is another way to tap your equity without refinancing. Instead of getting a line of credit, as you would with a "HELOC", you’d receive a lump sum of money. A home equity loan could make sense if you don’t want to refinance your first mortgage.
• Personal loan: Personal loans are an alternative to using your home’s equity for financing and putting your home up as collateral. You’ll generally need good or excellent credit to qualify for the best rates.

*What is the difference betweem a fix / flip and buy/ hold properities?

• A flip: It is a property that you buy at a low price point, then quickly sell for a higher price point. Flipping may or may not involve refurbishing the property.
• A Vacation Home: A vacation home is an umbrella term for Air BnB and VRBO's. These properties are trendy and in high demand. A Vacation home can also be purchased similar to a flip, generally under market value. The only difference is your profit source. Instead of selling, you make your money from booking out the property for short periods.
• A rental property: Rentals can be single-family, multi-family, duplex, apartment complex properties. Your profit will come from leasing out the property for long periods.
• A solid hold: A solid hold is a home you purchase below or at market value to sit on it. Once the housing market becomes hot and theirs a demand for the house in the area, you quickly sell it at the highest market point.