We are firm believers that it is a good idea to use a mix of investment strategies. We also feel strongly that real estate should be among that mix.
Even in real estate, there are numerous ways to invest. We have been through a thriving market and economy and we have seen the effects of overzealous investors that went through a market crash and economy recession. It is our philosophy to use real estate as a long term investment strategy to create wealth and use as a great tax deduction. When we say long term, we are referring to rentals. Some of the advantages to owning rentals as an investment include appreciation, mortgage reduction , cash flow and tax deductions. If you get all 4 of those in the same real estate transaction, you can start realizing returns that far exceed some other standard investments.
As mentioned above, the real estate market fluctuates. There are good times and there are not so good times. While it is always exciting to hear about someone who purchased a property for dirt cheap put a few thousand into it and make a $50,000 profit, it is not the standard. Most do not turn out to the dream investment that you hope for when entering the investment. Often times you will find that your expenses are higher than anticipated, or the worst is when it takes longer than you thought, and now the market has changed and you have to sit on it while paying interest to a bank that eats up all your profits and then some. Maybe even during the time you are fixing, the market crashes and you lose everything. We have seen it all and even been involved in some of it ourselves. While rentals may not seem as appealing as a quick $50,000, they are steady, secure, and provide a positive growth toward wealth, not to mention the tax advantages.
This is no problem at all. We have the ability to service a property after you purchase it. Check out our property management services. In other words you can become a landlord without having to deal with the hassle of managing your own rental.
We are experts when it comes to evaluating rental properties. Most real estate agents can look at an investment pro forma statement and tell you if the property makes sense based on the numbers provided. What they may not know is whether all the numbers are accurate. Since we manage rental properties, we have an in depth understanding of the expenses you will incur and the potential gains you will realize. We don't assume the numbers provided are accurate and take someone elseâs word for it. We do the math ourselves to make sure you are getting a sound investment.
While we are not financial planners or tax guru's, we know people who are. We have learned many of the best practices in structuring your rental properties to limit liability and provide tax benefits. We can provide a basic understanding of these principles and point you toward those who do have an in depth understanding to help you set it up the proper way.
One of the most important aspects of selling an investment property comes long before the sale. That is keeping accurate records. When we manage your properties, we keep detailed and accurate records so we can create a form that investors can evaluate quickly and decide if the investment is right for them. We have seen numerous properties sit stagnant on the market because when asked for the records, they don't have them. Investors will do one of two things at that point, they will either make a low ball offer or they will walk away. It is also important to make whatever changes are necessary early on to make the property as appealing as possible. This helps reduce vacancy which does two important things. It increases the cash you get now and the money you make from the sale. Investors are interested in the revenue a property brings in and they are willing to pay more for a property that has less vacancy. Last of all, it helps to list your property with a company who has a lot of investors they currently work with.
Once again we are not tax gurus, but there are ways to structure your rental business from the beginning that provide many tax benefits and limit taxes when it comes time to sell and we are not referring to a 1031 exchange. We know the right people to refer you to assist with the proper set up.
When the market crashes rentals become hot. All those people losing their homes need to go somewhere to live. At that point, demand is high and supply is short, which forces up the rental prices increasing your cash flow and the value of your property.
Rental prices do not fluctuate the same as the rest of the real estate market. However, if you are buying single family homes as your rental properties, you need to be cautious and make sure that there is still a cash flow. Do not buy based on tax advantages alone. The beauty of a long term investment is that even if the market fluctuates, as long as you are cash flowing, you can keep what you have until the market comes back.
No one can really tell what lies in the future, but in Utah there continues to be a higher demand than supply. The interesting trend here is that the upcoming generation seems to prefer renting over buying. It allows them freedom to move and not be tied down to one location. All trends go through a cycle , but as for now, the rental market is good. We don't know of any other long term investments that have the same stability and provide the same benefits that rental properties do.