According to the National Association of Realtors (NAR) second-home sales (for vacation homes and investment homes) accounted for four out of 10 homes sold in 2005. While vacation-home buyers purchase primarily for enjoyment, investment-home buyers are looking to generate income in the following ways.
Returns of 10 percent and more are not uncommon if you select good real estate properties. It’s a return rate you won’t find on bank products or with most stocks.
#2: Cash Flow
More than half of all investment-home buyers rent out their properties. Month in and month out these properties create income from renters AND gain long-term appreciation. Rental rates are going up as potential buyers are renting rather than buying. Make sure you get ALL the costs involved in running the property and accurate insurance quotes.
#3: Less Volatility
While real estate cycles through periods of highs and lows, it does not change dramatically day-to-day like stocks. Investing in real estate is viewed as being less speculative than stocks. Less liquid as well but most the real estate millionaires became just that by holding properties long term.
#4: Tax Advantages
Your real estate investments offer you two tax advantages: you can deduct property expenses and
depreciation. Plus doing a 1031 exchange lets you avoid paying tax on profits from the sale of rental property if you roll it into another real estate investment property (talk to your tax advisor). This 1031 allows you to to reinvest the gain from a property you sold without paying capital gains tax until you sell it years later - allowing you to buy bigger better properties along the way.
#5: Value-Added Improvements
The saying “buy it low and sell it high” applies to stocks and real estate. The advantage with real estate is you can buy inexpensive property, fix it up, then raise the rent or sell it for more money.
If real estate investing is a path you are interested in pursuing, please feel free to call 305-282-2133 or email with any questions you have.