MiamiRealEstateKing

Posts Tagged ‘Investing’

Six Ways Investing in Real Estate Can Save You Money

In Buyers, Commercial Real Estate, florida, Investing, Investor, IRS, miami, miami beach, Miami-Dade County, Multi-Family Real Estate, real estate, Roth-IRA, Self-Directed IRA, Sellers, tax deductions, Tax Matters on May 10, 2013 at 1:28 pm

There are many investment vehicles. Stocks, bonds, art, coins, postage stamps, toys, commodities and real estate, among others.

Some economists even suggest that as long as you are disciplined and can comfortably pay for it, you should buy any investment you can. If you can finance the purchase, even better.

However, real estate is probably the only one against which you can borrow and have the asset pay itself off through rental income, EVEN as it pays YOU.

In fact, I have spoken to property owners who have managed to leverage a property two, even three times in their lifetime, by borrowing against the property they now own free and clear, to buy another.

What’s more, the income from the new property (let’s call it property B), paid with borrowed funds from say, property A, plus the income they still generate from that newly leveraged property A, can over time, pay back the loan on A from rent collections on A and B, while proving the owner with a boost in passive income. In other words, party money.

Even if you can purchase property in cash, many recommend you consider financing after the fact. Leveraging allows you to possibly, acquire two or more properties, update or fix them up and let themselves carry the burden of paying down the loans with rental income.

Over time, you would have the ability to acquire even more properties and eventually, when you are at the right stage in your life, own them all free and clear while enjoying all that income in retirement. The ultimate 401K or IRA.

Of course, you must buy right and be disciplined throughout. With every payment received in rents, you must set aside a portion every month to pay for licenses, taxes, insurance maintenance and miscellaneous repairs, improvements, etc. In short, you must budget as you would with any business.

Below, we examine some of the advantages for owning investment property and in particular, multi-family property.

1. Economies of Scale

When you buy a single family house or condo unit, small investors often feel they’re easy to manage. That may be true to some extend. On the other hand, consider that with a multi-family building, you only deal with one roof and/or one yard to mow, you are the board that approves tenants or how many times a year you rent your property and in one single trip, you can fumigate, inspect and have a punch list ready for your handyman, plumber and/or electrician to take care of, minimizing headaches.

2. Lower Taxes

There are several tax incentives for real estate investors. If you are employed, deductions from real estate investments may be used to offset wage income. In addition, there are a number of tax breaks for real estate investment which often allow property owners to turn a loss into a profit. Deductions can include any actual costs involved in financing, managing and operating the property, to include maintenance, repairs, property management fees, travel, advertising, and utilities. In addition, the IRS allows a depreciation deduction that accounts for a portion of the building (not the land portion of the property) over time, usually some 27 years.

3. Cash Flow

A property can generate negative or positive cash flow. Cash flow simply refers to the amount of money that flows in and out in pursuit of maintaining a property. Rents are an example of cash flowing in while taxes and insurance must be paid out, typically from a portion of the rents received. When the amount of income received exceeds the payments, it is said you have a positive cash flow. There are times when the amount of payments exceed your income and in these cases, you are said to have a negative cash flow. Regardless, when it comes to real estate investment, there are two more important concepts involved: pre-tax and after-tax. A pre-tax positive cash flow for instance, may also be said to occur when income received is greater than expenses before taxes are paid. However, even if your are experiencing a negative cash flow, you may end up with an after-tax positive income when your expenses are more than your collected income, but the tax breaks bring you back in the black. Depreciation can often help turn a negative into a positive.

4. Use Leverage

An old rule of thumb in real estate is to never spend a dime on your real estate investment unless you have to and/or unless it will save you money. Leverage is an important aspect of saving money through real estate investment because a real estate investor uses leverage to increase their assets without spending their own money. By taking advantage of your equity, you also improve your return on equity and it provides you with tax-free funds to help fund your next deal or improve the value of your existing property by making updates, upgrades or repairs that entice tenants (to come in or stay) and should allow you to raise rents and improve your bottom line.

5. Equity Growth

The best way to save money and earn money, is to build up equity from real estate investments. That way, with high equity you are able to save on your mortgage while earning a nice chunk of profit. However, idle equity is like idle funds in the bank. Ideally, you are always utilizing your equity to improve the value of the property and/or pursuing and acquiring new opportunities. Often, selling is a great way to take advantage of existing equity, which would allow you to reposition yourself in a potentially better property with better opportunities. For instance, you may own a building sitting on prime land which may allow you to build a much larger structure for more potential. However, you are not a builder and you’re not in the mood to start. Even if that property is making money, selling it may bring enough to allow you to purchase a more suitable property or properties.

6. The Benefits of Inflation

Generally speaking, inflation can help you save money on your real estate investment because as rent increases, your mortgage costs will remain static (assuming it is a fix-rate loan), which means you will improve your position with the increased cash flow from the rent and equity growth. Although inflation is quite low these days, there is a typical amount of appreciation properties experience as a result of even low inflation, which adds to your equity without a single penny out of pocket.

Of course, it is not all rosey with real estate investing. There are a LOT of factors that deter people from getting involved. It is scary, you could lose a lot if you engage from an emotional standpoint and there are headaches and horror stories borne from bad tenant situations to fill a few books.

Regardless, I reiterate that if you buy properly, budget properly and stay involved, you may never have to worry about money when it counts – throughout the live of the property and during your retirement. What could be more beautiful than that?

Most real estate professionals can help a buyer or seller make the right buy or sell decisions. Obviously, as you would listen to a quality attorney, doctor or accountant, listening to a quality real estate professional’s valuable information will go a long way in helping you achieve your buying or selling goal. Budgeting however, is a function of habit and here again, you must proactively seek qualified, quality, professional advise.

Florida foreclosure facts

In real estate on February 25, 2011 at 12:12 am

TALLAHASSEE, Fla. – Feb 24, 2011 – One media story says foreclosures are up – the next story says foreclosures are down. A report released by Florida Realtors clears up the confusion by explaining the three different levels of foreclosure activity that analysts consider, and listing the state numbers for each during 2010.

“The Florida Foreclosure Report” found general confusion about the definition of foreclosure. One group might focus on the number of homeowners who received at least one notice of foreclosure and consider that “the number of homes in foreclosure.” A second group might focus only on the number of homes actually taken over by a bank. But while the number of foreclosure notices could be rising, the number of homes actually taken over by a bank could be declining.

The report outlines three levels of foreclosure, which added together are the “foreclosure rate”:

Lis Pendens: Homes under Lis Pendens have received at least one foreclosure notice.

• Notice of foreclosure sale: Homes that received a notice have been scheduled for a foreclosure sale, but the homeowner may still find a way to keep the house.

Real estate owned (REO): Bank-owned homes post-foreclosure.

In 2010, only 2,800 Florida properties made it through the foreclosure process to become REOs. Of the rest, 180,402 were Lis Pendens and 140,105 received a notice of foreclosure sale. However, the total number of homes in some phase of foreclosure – all three categories – comes out to 323,307 Florida households.

Other report highlights:

• In 2010, 1 in every 29 Florida housing units were in some phase of foreclosure. In 2008, it was only 1 in every 54.

• The top Florida counties for high foreclosure rates are, in order: Lee, Miami-Dade, Osceola, Charlotte and Orange.

• The Florida counties for lowest foreclosure rates are, from least up: Taylor, Union, Jefferson, Lafayette and Liberty.

The complete report is posted online on Florida Realtors website under Legislative Research.

Reprinted by Permission: © 2011 Florida Realtors®

 

UF survey: Florida’s real estate outlook perks up in several areas

In real estate on February 3, 2011 at 11:05 am

GAINESVILLE, Fla. – Feb. 2, 2011 – Optimism has increased slowly but steadily in Florida real estate markets through the fourth quarter of 2010, a new University of Florida survey finds.

The fourth quarter Survey of Emerging Market Conditions found improvement in several key categories, including the outlook for sales in new single-family homes and condominiums, office occupancy, retail occupancy, land investment and capital availability.

Much of the optimism derives from politics with the defeat last fall of Amendment 4, a proposed constitutional amendment that would have required a referendum for all changes to local government comprehensive land-use plans, said Timothy Becker, director of UF’s Bergstrom Center for Real Estate Studies. The conclusion of mid-term elections also eased respondents’ uncertainty as it provided a clearer picture of the future.

“The state welcomed a new governor who has promised to make Florida a more business-friendly state,” Becker said. “If he can succeed on his goals, respondents believe it will have a positive impact on the real estate market. Any help in attracting new business to move or form in the state will no doubt have a positive impact on job growth.”

Survey respondents’ expectations for occupancy and rent increased across every property type. The investment outlook rose in a majority of the property types, and the statewide outlook was the highest since the survey’s inception in 2006. Additionally, private capital is abundant as investors seek the few good products on the market. Overall, the market appears to be improving and will continue to improve at a slow pace over the next year.

Despite the positive outlooks in many asset classes, respondents’ optimism is tempered by troublesome economic factors, most notably Florida’s high unemployment rate of 12 percent. Respondents also relayed fears over federal, state and local budget issues.

Local revenues continue to decline as property values decline, placing a tremendous burden on local budgets,” Becker said. “This will require tough decisions by local officials.”

The outlook for single-family and condominium sales increased slightly in the fourth quarter, but Becker said home builders continue to have a negative outlook because financing is difficult to obtain and lower prices in the foreclosure and short-sale market take potential customers away from the new housing market. Unexpectedly, however, respondents’ outlook for investment in residential development increased for both single-family homes and condominiums. Becker said the low cost of fully developed lots provides incentive for investors and developers.

Expectations for office and retail occupancy continued to improve. Occupancy expectations in the office sector increased, and the outlook for rental rates increased slightly but is expected to continue lagging inflation. In the retail sector, occupancy expectations improved for all property types.

Becker said respondents believe occupancy will increase in neighborhood centers and large retail centers. Accordingly, the investment outlook in retail increased for neighborhood centers while declining for the remaining property types.

Land investment and capital availability also rose this quarter. More respondents believe land is beginning to be priced at levels that support longer-term investment, despite the fact that lack of financing for land purchases continues to be a concern. The optimistic outlook for capital is due in large part to respondents’ belief that future availability will increase.

“Respondents believe there is a need to add additional apartment units based on the fundamentals and expect development financing to be available for that sector,” Becker said. “Private equity continues to be plentiful for quality core assets and valued-add assets.”

Expectations for apartment occupancy and the industrial sector were mostly stable.

Reprinted by Permission: © 2011 Florida Realtors®

 

Is Foreclosure Inevitable for you? Now you can stay in your own home…legally!

In real estate on January 29, 2011 at 2:46 pm

Most lenders who eventually foreclose on a borrower and take a home back do not want the responsibility nor the potential liabilities of ownership. However, most lenders are not Fannie Mae (FNMA).

Fannie Mae has created a program called the “Deed-For-Lease Program” or D4L. Qualified occupants (homeowner-borrowers or tenants), “…must have the ability to pay market rent (not to exceed 31 percent of his or her monthly gross income)”, among other things. However, the ability to stay in one’s home can be a wonderful option for some.

To find out more, review the Deed-For-Lease Frequently Asked Questions (D4L FAQs) page HERE.

Though about 70% of folk who lose their home to foreclosure find themselves in this situation because they fail to seek help or equally tragic, they seek help from the wrong people (non-professionals who may also be incompetent or worse), foreclosure may be inevitable for some.

Regardless, there are solutions available and speaking with the right professional can make a world of difference in whether you lose your home to foreclosure, save if from foreclosure and the long-term damaging effects of it or at least, if you’re going to have to move and rent elsewhere, now you may be able to keep your familiar roof over your head as a tenant.

Staying in a property may be most important f0r those with special needs, who have young children, etc. Get the facts. Contact me today and I will send you a link with more information about this program that can help you stay in your home and minimize the traumatic consequences of foreclosure.

Key Biscayne, Bal Harbor, Fisher Island Named by Forbes among 10 Best Places to Get Luxury Condos Deals

In forclosure, foreclosure, home sellers, miami, miami beach, mortgage, real estate on August 6, 2009 at 8:26 pm

MIAMI – Aug. 6, 2009 – Thanks to a huge inventory, many condominiums are bargains these days.

Forbes magazine took a look at the nationwide condo market to determine where the best deals could be found. Because financing can be hard to get, prices on luxury models have fallen the most.

The magazine suggested that the best deals come from paying cash or at least putting down enough cash so the property can be purchased with a federally-backed loan. It also suggested that buyers bid low. Since these properties are moving slowly, even a lowball offer might be accepted.

Here are the top 10 best places for condominium deals and their ZIP codes, as determined by Forbes:

1. Olympic Village, Calif., 96146

2. Tahoe City, Calif., 96145

3. Terra Linda, Calif., 94903

4. Fisher Island, Fla., 33109

5. Dallas, Texas, 75205

6. Malibu, Calif., 90265

7. Bal Harbour Fla., 33154

8. Key Biscayne, Fla., 33149

9. Lake Forest, Ill., 60045

10. New York City (Upper West Side), 10069

Reprinted with permission © Copyright 2009 Florida Association of Realtors®

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If you wish to find an opportunity in any Florida market or need the assistance of a professional, visit http://www.Immobel.com/MiamiRealEstateKing to find your dream home, vacation home or 2nd home.

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