Must-Know Facts about Residential Real Estate Investing Noah George
There are plenty of tax advantages ď ˝
Investing in residential real estate comes with numerous tax advantages. You can factor in deductions such as property depreciation, mortgage interest, the cost of repairs/maintenance/services, travel costs, meals, and even defer capital gains tax through the use of a 1031 Exchange.
You have more control than you think ď ˝
Bottom line: You select the market to buy in. You only buy a property if you’re happy with the acquisition price. You agree on a rehab budget. You hire a property manager. You and your property manager select tenants. You decide to hold or sell.
The value is in consistent monthly cash flow
Buy and Hold residential investing is beautiful once your property is performing. You mortgage payment goes out, rental income comes in, and hopefully it becomes clockwork on the 1st of every month. It’s like getting a monthly paycheck without having to work in a cubicle! Isn’t that what you want?
Tenants control cash flow and ROI ď ˝
Not so fast though...related to the previous point I made, this may seem obvious, but without a tenant you literally have no cash flow. What does that mean? Tenant class is extremely important. Picking the best and most responsible tenant possible (easier said than done) is arguably the most important factor when investing in residential real estate.
Appreciation
I’ve called this the “icing on the cake” in a previous post I wrote about ROI, and if you’re a buy and hold investor with assets in a cash flowing market, it truly is.
Loan pay down
The amazing thing that some new investors fail to realize when looking at ROI, is the fact that when your property is occupied and cash flowing, your tenant is paying down your principal, interest, taxes, and insurance for you. It’s great! So, even if your property “breaks even” one month due to unexpected repairs or maintenance, you still have someone else paying a majority of your expenses. How is that not amazing?
Creative financing options ď ˝
Pay all cash or get a traditional mortgage? You may think those are the only two options available for buying residential real estate. Luckily, there is a diverse range of additional financing options. Seller financing, getting a loan from a self-directed IRA, private loans, master lease with option to buy ‌ these are just a few creative ways to finance your next investment.