The property purchased as a private residence is a typical way of care for their family needs; But in addition to the elimination of minimum tax for interest costs, and perhaps some accumulated wealth through appreciation, the benefits of home ownership are not measured in the same financial terms with property obtained through real estate investment.
Home buyers are looking for a safe tree environment, good school district, lots of bedrooms and bathrooms, and beautiful open floor plans.
Real estate investors have never bought investment property based on these things besides how they can affect rent and occupancy.
Real estate investment is not about how beautiful the property is, but how big investor investment is refund. Or as an investor once told me, “Only a beautiful woman. What are the numbers?”
Fair enough. So let’s talk numbers.
The benefits of real estate investment lead to four ways investors plan to make money on investment properties.
1. Cash Flow
The main purpose of most property investors, of course, is a rental room in their assets with the intention to collect rental income.
Cash flows are generated after the operational costs of property and debt services (i.e., mortgage payments) are deducted from this rental income. When more cash enters than the results of the results are “positive cash flows” that are available regularly for investors regularly.
2. Tax shelter
Real estate investment also provides benefits of investors to legally reduce annual or final federal income taxes in general by allowing the owner to take pieces for the following:
Acquisition fees – Most of the costs incurred at the time of purchase can be deducted in the year of purchase.
Property expenses – All costs incurred in the operation of properties can be deducted.
Flowers mortgages paid on mortgages can be deducted.
Depreciation – IRS also assumes that your building is wearing and becomes less valuable from time to time and therefore allows you to take a reduction for the suspected decline in what the cost recovery tax code (i.e., depreciation).
Of course there are nuances and exclusions in all tax issues that must always be discussed by investors with tax experts. But you get the idea.
3. Amortization of Loans
Loan amortization is reducing periodic loans from time to time. In other words, with a fully amortized loan (i.e., not only interest) every payment is made reduces a number of points. The benefits around real estate investment are that every time tenants pay their rent virtually pay debts and therefore help investors buy property.
The award is certainly not exclusive for rental income property. For any property sold at prices more than the original purchase price will benefit from the appreciation whether it is a private or office residence.
However, with investment property, the owner does not have to leave appreciation to happen to be a typical homeowner will do it. The truth about real estate investment is that investors buy rental property revenue streams.
As a result, the more income streams that can be produced by the owner, maybe by reducing vacancies or reducing wasteful expenses, the more they can expect their property worthy; And the faster they can impose these changes, the faster their rental properties tend to appreciate.
Real estate investment has been shown to make money for investors. But it is not determined by the same emotional feelings that can make you buy a home for your family. It’s all business. So approach logically and always run all numbers carefully before making real estate investment decisions.