Anyone can tell you that there is no such thing as a “sure bet” in the world of investing. However, over the past several decades, real estate investments have proven to be lucrative and reasonably reliable in comparison to other forms of investments. While real estate investments have no “get rich” guarantee, they can be great ways to earn extra income, provided you have the right guidance. That’s why it’s important to enlist the services of The Linda & Ryan Lowe Team.
Having the professional assistance of a real estate expert can be invaluable, even if you’ve invested in real estate before. A good agent can help you determine which kinds of properties are best for you to invest in, help you avoid common mistakes, and guide you through the entire buying and selling process. We can provide you with information and advice on topics such as:
- Tips for starting out
- Multi-Unit Investment Properties
- Single-Family Homes as Investments
- Condos as Investments
- Investing in Foreclosures
- Second Homes
As a potential real estate investor, you’re in competition with both run-of-the-mill buyers and other serious investors like yourself, having a real estate professional on your side will help. We can help you to ensure that this venture is a rewarding one. Don’t take that step alone. If you’d like to talk about ways that we can be of assistance to you please contact us, we will be very happy to assist.
Below are a few advantages of investment real estate
- Cash Flow (Total Rent minus Total Expenses)
- Appreciation (Average in Centre County is 2-3% per year)
- Leverage: Using a mortgage as leverage; 20-25% of your own money and the bank financing the remainder. While paying interest back to the bank you’re also paying down your principal and building equity with your tenants paying you rent. If you purchase shares in a stock, do you pocket the earnings of the entire stock or just your shares in it? In real estate, you gain the earnings of the entire investment, not just your share of the property. So, if a $100,000 property appreciates 3% a year for five years, you pocket all of that appreciation, not just the earnings on your equity. As with cash flow, your earnings can be leveraged into reinvestment.
- Tax Benefits/Deductions (Always confirm with your tax consultant): Repairs, Advertising, Cleaning/Maintenance, Home-Owner Association Fees/Condo Dues, Insurance Premiums, Legal Fees, Mortgage Interest, Taxes, Utilities, Schedule E Preparation, Travel expenses for showing rental properties, maintenance, etc. You can begin depreciating the value of the entire rental property as soon as the rental home is ready for tenants, even if you don’t yet have any. In general, you depreciate the value of the home itself (but not the portion of the cost attributable to land) over 27.5 years. You’ll have to stop depreciating once you recover your cost or you stop renting the property, whichever comes first.
- Depreciation (Always confirm with your tax consultant): Depreciation refers to the value of the property that’s lost over time due to wear and tear. In the case of improvements to a rental home, you can deduct a portion of that lost value every year over a set number of years. Carpeting and appliances in a rental home, for example, are usually depreciated over five years.
- Profits & Losses on Rentals: The rent you collect from your tenant every month counts as income. You offset that income and lower your tax bill by deducting your rental home expenses including depreciation. If for example you received $9,600 in rent during the year and had expenses of $4,200, then your taxable rental income would be $5,400 ($9,600 in rent minus $4,200 in expenses). You can even write off a loss on a rental home as long as you meet income requirements, own at least 10% of the property, and actively participate in the rental of the home. Active participation in a rental is as simple as placing ads, setting rents, or screening prospective tenants.
- If you are interested in State College rental properties look into neighborhoods like Park Forest, Toftrees, and downtown State College. Bellefonte, Boalsburg, Lemont, and Houserville are also great areas for investment properties.
- Vacation Homes: If you have a vacation home that’s mostly reserved for personal use but rented out for up to 14 days a year, you won’t have to pay taxes on the rental income. Some expenses are deductible, though the personal use of the home limits deductions. The tax picture gets more complicated when in the same year you make personal use of your vacation home and rent it out for more than 14 days.
- State College is a popular vacation home location. Many Penn State Alumni and Penn State Sports fans buy football houses and weekend rentals. These second homes make visiting State College and Central PA easy, but also provide some additional income.