30
May
By First Rate Financial Group
Real Estate

Buying A Second Home And How To Pay For It

Buying A Second Home And How To Pay For ItHow does an average homeowner become a real estate investor? Certainly, owning a home is an investment in real estate. However, this guide discusses the next step for many to become a real estate investor. This is to buy another property and use it for a commercial purpose. Owning another home is less of a burden when an investor finds a way to make the home pay for itself.

Here are some tips on how to help a property generate cash flow:

Renting Out A Home

Renting the home to others may be an effective way to pay for it. To do this well, a real estate investor looks for a home with special characteristics. The home is for sale at a low enough price and can be financed well enough so that the cash flow coming in for the rent will be equal or more to the expenses of owning and managing the property. It is terrific if the property makes a positive cash flow each month, even if only a small amount.

If a property has a $50 per month positive cash flow, then that small amount builds up over time. Adding more properties with positive cash flow increases the investment portfolio value quicker.

Home Office

Using all or part of a home as an office creates special tax deductions for the expenses that cover the portion of the property used for business. Even if a homeowner does not have enough money to buy another home, starting a small business by using a home office may help create the money for the investment needed as a down payment on the second home.

Renting A Home Out As A Vacation Rental

Many like to rent homes in nice areas for vacation purposes. The home can rent out as a full home or as individual rooms in the home. Airbnb is a useful web-based service that can bring rental customers for those interested in doing this.

Bed & Breakfast

Another way to make money by owning a property is to turn it into a commercial enterprise as a bed & breakfast. Depending on the location, and the number of tourists attracted to a particular area, a bed & breakfast business can be profitable.

Tax Implications

Even if owning a second home does not make positive cash flow, it can still be financially beneficial when it reduces the tax burden. Work with an accountant and/or investigate the tax implications of owning the property. It may be possible to take deductions such as for property expenses and non-cash deductions such as depreciation, which when combined with other income, reduces the overall tax liability.

If owning a second home reduces the taxes to be paid, this is a financial benefit that offsets any negative cash flow. Tax savings is money in the pocket, so this counts as part of the positive cash flow that comes from owning a property.

Summary

These are just a few ideas to consider that may help pay for a second home and make it easier to become a real estate investor.

When you are considering the purchase of a new property, be sure to partner with a trusted mortgage professional.

10
May
By First Rate Financial Group
Real Estate

The Benefits Of Developing A Multi-Use Property

The Benefits Of Developing A Multi-Use PropertyRenovations that create a multi-use property or the development of a new multi-use project can be a very attractive investment especially in urban areas that are undergoing redevelopment. The concept of multi-use is to make the most of the site that is revitalized or developed.

Multi-Use Projects

Typical multi-use projects have a mixture of retail space, restaurants, offices, and/or living spaces. They may include parking areas. Large multi-use projects can also become destination locations that are core improvements, which create a momentum for the gentrification of an entire area. Waterfronts, boardwalks, and walking promenades are successful as multi-use projects in many cities.

The advantages for investors in these projects include the ability to design the use of the space to maximize the return on investment (ROI). Depending on the area for the project’s construction, there may also be tax advantages.

Tax Advantages

Under the new tax laws, Opportunity Zones all across America have been created to stimulate redevelopment in areas that are distressed. The federal tax advantages include either delaying capital gain taxes or avoiding them altogether if investors hold the investments for more than ten years.

It is also possible to sell a project in an Opportunity Zone for a profit and then reinvest the proceeds under a tax exchange transaction into another investment in an Opportunity Zone and avoid paying the capital gains. Check with a competent real estate and tax attorney to learn how to set up an Opportunity Zone Fund to maximize the tax advantages.

Additionally, the financial basis used for calculating any profits on the second transaction is raised, thereby locking in the tax savings on the profits from the first transaction. This is a very effective strategy for build-to-suit developers who organize a multi-use development project in an Opportunity Zone with the intent to sell it.

State, County, And Municipal Support

Depending on the location, there may be state, county, and/or municipal support in terms of tax abatements and contribution of the land and funds for the development of a multi-use project.

Lack Of Basic Services

Another key consideration is that many Opportunity Zones lack sufficient basic services. Some neighborhoods do not even have a grocery store. A multi-use development, in a distressed neighborhood, which offers services and stores for these basic needs, is likely to experience an immediate consumer demand for the offerings.

Loans And Investment Funds For Multi-Use Projects

Lenders are more attracted to multi-use projects because of the possibility of higher average rents per square foot that will cover the monthly mortgage payments. Multi-use projects can be successfully funded by crowd-sourcing techniques as well.

Opportunities For Real Estate Agents And Brokers

REALTORS® have commission-earnings potential in the sale/acquisition of the properties for a multi-use development, leasing out the properties when developed, and selling a project upon construction completion or after being leased out.

Conclusion

The advantages of multi-use approaches as a development project are significant. There is plenty of support available in many parts of the country for these projects. REALTORS® benefit from many opportunities for commissions on each project as the development begins, the project is leased out, and then potentially sold.

If you are interested in investment properties, be sure to schedule an appointment with your trusted lending professional to discuss your financing options.

04
Jun
By support
Home Mortgage Tips

Thinking About Buying An Investment Property? 6 Tips To Ensure You Don’t Get Fleeced

Thinking About Buying an Investment Property? 6 Tips to Ensure You Don't Get FleecedPurchasing an investment property is one of the most important decisions that you’ll ever be a part of. As such, it’s a necessity to make your decisions with only the most careful of consideration.

Here are the six tips that you need to heed in order to ensure that you don’t get fleeced.

Find The Right Property At The Right Price

Yes, this is a whole lot easier said than done. However, it’s not impossible. All it takes is some patience and research.

You have to determine what everything in your area is selling for in order to be able to spot a bargain! Further, you need to know that various property classes will outperform each other. For example, land and home units will appreciate differently.

Figure Out The Cash Flow

It’s always a good idea that you know how to maintain your mortgage repayment obligations over the long term. It’s recommended that you analyze the cost of servicing any loan only on an after-tax basis. By taking this approach, you have the power to calculate and put the cost into actual terms that make sense for you.

Look For A Good Property Manager

Finding a good property manager who is a professional in his or her field is vital. Your property manager’s job will be to make certain that everything is in order between you and any of your tenants. A good property manager can extract the best possible value for you from your property and help to keep your tenants in line as well.

Choose The Appropriate Type Of Mortgage

There are many options available for financing the investment property that you choose, so it’s best to get sound advice. Options such as a variable rate loan and a fixed rate loan are both popular choices, but your specific circumstances will dictate what’s most suitable for you. Consider that variable rates often end up being cheaper over time, yet fixed rates at the right time are ideal.

Take Equity From Another Property

Leverage the equity from your residence or another investment property. Doing this is actually an ideal way to purchase your investment property. Equity can be calculated by way of calculating any difference between what you owe on your mortgage and the overall value of your property.

Comprehend Both The Market And Dynamics When Buying

It’s best to analyze what other properties are available in the area when you’re looking at an investment property. It’s very advisable to actually talk to both local people and real estate agents in the neighborhood. They can give you hints on small, yet vital, things like which side of a street is considered more desirable.

These are the six tips to help make sure that you don’t ever get fleeced when buying an investment property. They can make the difference between purchasing a great property that has a high return on investment and purchasing a lemon.

Call your trusted mortgage professional today for some answers and more information.