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Residentail Real Estate Markham Investment

When real estate is going up, up, up, investing in real estate can seem easy. All ships rise with a rising tide, and even if you’ve bought a deal with no equity and no cash flow, you can still make money if you’re in the right place at the right time. However, it’s hard to time the market without a lot of research and market knowledge. A better strategy is to make sure you understand the four profit centers for residential real estate investing, and make sure your next residential real estate investment deal takes ALL of these into account.Find expert advice aboutĀ Real Estate Markham.

Cash Flow – How much money does the residential income property bring in every month, after expenses are paid? This seems like it should be easy to calculate if you know how much the rental income is and how much the mortgage payment is. However, once you factor in everything else that goes into taking care of a rental property – things like vacancy, expenses, repairs and maintenance, advertising, bookkeeping, legal fees and the like, it begins to really add up. I like to use a factor of about 40% of the NOI to estimate my property expenses. I use 50% of the NOI as my ballpark goal for debt service. That leaves 10% of the NOI as profit to me. If the deal doesn’t meet those parameters, I am wary.

Appreciation – Having the property go up in value while you own it has historically been the most profitable part about owning real estate. However, as we’ve seen recently, real estate can also go DOWN in value, too. Leverage (your bank loan in this case) is a double-edged sword. It can increase your rate of return if you buy in an appreciating area, but it can also increase your rate of loss when your property goes down in value. For a realistic, low-risk property investment, plan to hold your residential real estate investment property for at least 5 years. This should give you the ability to weather the ups and downs in the market so you can see at a time when it makes sense, from a profit standpoint.

Debt Pay down – Each month when you make that mortgage payment to the bank, a tiny portion of it is going to reduce the balance of your loan. Because of the way mortgages are structured, a normally amortizing loan has a very small amount of debt pay down at the beginning, but if you do manage to keep the loan in place for a number of years, you’ll see that as you get closer to the end of the loan term, more and more of your principle is being used to retire the debt. Of course, all this assumes that you have an amortizing loan in the first place. If you have an interest-only loan, your payments will be lower, but you won’t benefit from any loan pay down. I find that if you are planning to hold the property for 5-7 years or less, it makes sense to look at an interest-only loan, since the debt pay down you’d accrue during this time is minimal, and it can help your cash flow to have an interest-only loan, as long as interest rate adjustments upward don’t increase your payments sooner than you were expecting and ruin your cash flow.

Tax Write-Offs – For the right person, tax write-offs can be a big benefit of real estate investing. But they’re not the panacea that they’re sometimes made out to be. Individuals who are hit with the AMT (Alternative Minimum Tax), who have a lot of properties but are not real estate professionals, or who are not actively involved in their real estate investments may find that they are cut off from some of the sweetest tax breaks provided by the IRS. Even worse, investors who focus on short-term real estate deals like flips, rehabs, etc. have their income treated like EARNED INCOME.

The short term capital gains tax rate that they pay is just the same (high) they’d pay if they earned the income in a W-2 job. After a lot of investors got burned in the 1980’s by the Tax Reform Act, a lot of people decided it was a bad idea to invest in real estate just for the tax breaks. If you qualify, they can be a great profit center, but in general, you should consider them the frosting on the cake, not the cake itself. Any residential real estate investing deal that stands up under the scrutiny of this fundamentals-oriented lens, should keep your real estate portfolio and your pocketbook healthy, whether the residential real estate investing market goes up, down or sideways.


Avoiding Common House Buying Mistakes

For many people, buying a home is the quintessential symbol of success, and rightfully so because it is one, if not the most expensive purchase we’ll ever make in our lifetime. Given that a home mortgage will impact your finances for many years, if not decades, it would be foolish to dive blindly into this commitment. Here are some of the usual errors those first-time home buyers.

Not reviewing your credit report

If you’re like the majority of people, you’d probably buy a home through a mortgage loan. Individuals with not so good credit rating may find it hard to take out a housing loan. Even if you have perfect credit history, you should still get a copy of your credit history to see if there are erroneous entries. Getting a copy of your report months before you apply for a loan will help you correct errors so you can receive an approval for a mortgage effortlessly and with a reduced interest.

Failing to get a preapproval

Nowadays, majority of sellers prefer buyers who are already preapproved by a certified loan provider. Additionally, being preapproved before going house hunting could save you time and heartache because you already have a realistic budget instead of talking yourself into getting a costlier home that has attributes you desire but don’t really need. Get more info onĀ sell my house fast york pa.

Not considering the total cost of ownership

Many first-time homebuyers misjudge what they will be expending financially on their brand new residence. Keep in mind; mortgage is just one of the payments you will contend with. You need to think about the cost of taxes, insurance, utilities, and transportation. If you’re purchasing a pre-owned residence, you’ll also have to consider costs for maintenance and repairs.

Not the property’s resale value

As a homebuyer, selling a house may not be something you’d consider for now. Nevertheless, nothing really is certain in this world, as life and career transitions can force you to transfer to a new house anytime. You’re making a big investment, and it would be to your benefit if you can get back almost all of that investment if ever you have to move in the future.