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Commercial vs Residential Real Estate Investing in 2022

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In the debate between residential vs commercial real estate investment, many ask, “Which is better?” The answer depends on a variety of factors such as your budget, your existing area of expertise, and your risk tolerance. We’ll explain how each of these factors can help you decide which is better in your case.

Residential or commercial real estate investing is more than just buying a home or looking for an investment property. Do you think it is easy to predict success in a real estate business, where circumstances keep fluctuating now and then? To some extent, the possible hindrances can be controlled with a set of ground rules which you need to implement on your next residential or commercial real estate investing deal.

Benefits of Residential Real Estate Investment

It is far easier to get a loan for residential real estate than commercial real estate because the residential real estate market is considered much more stable. Individuals and families always need a place to live. Businesses can more easily move, and you can lose far more money by picking a bad commercial tenant than a family that misses the rent one month. This means residential vs commercial real estate investing favors residential real estate if you don’t have experience vetting tenants.

People will forgo credit card bills and cut their budgets to avoid being evicted. Commercial tenants may miss the rent for months, and it is difficult to evict them. Furthermore, you could lose commercial tenants whose bankruptcy costs you months of back rent. This means you’re more likely to continue seeing rental income from financially stressed apartment dwellers than commercial tenants.

This makes residential real estate safer than commercial real estate during a financial downturn. It may go down in value and see more skipped payments than before, but it won’t go down in value or cash flow as much as an empty strip mall. Residential real estate may be filled quickly when someone is evicted. Perhaps you put the rental property on a short-term rental site to cater to tourists coming next weekend.

Or you lower the deposit to get a tenant in at the start of the next month. It can be hard to find a new commercial tenant. Residential real estate thus comes with less risk to the landlord that they’ll go months without cash flow from the property. Residential real estate has better long-term average growth. The property value automatically increases with inflation, and rents are easily increased at the rate of inflation, as well.

Residential vs Commercial Real Estate Investment

With commercial tenants, you may be locked into a set rental rate for years based on the contract you signed. In the residential vs commercial real estate investing debate, residential wins if you have limited cash. You can buy one or two houses for less than it takes to buy a strip center or store. The residential vs commercial real estate investing debate is often moot if you end up renting out your old house or inherited property.

The residential vs commercial real estate debate tends to focus on cash flow numbers. However, when you’re deciding between residential vs commercial real estate, recognize that you probably have more expertise transferable to residential real estate investing. Many contractors know how to renovate homes. This makes them qualified to buy fixer-uppers, repair them and sell them for a profit.

All they have to do is get a handle on the financial side and the marketing of property for sale. An apartment manager is better suited for the residential side of the residential vs commercial real estate debate. You already know how to vet tenants, collect rent and handle late-night calls for plumbing repairs. In general, new investors can find more resources for investing in residential real estate over commercial real estate.

You have to be careful not to renovate a property to look like a dream home that’s more expensive than what the market would bear. However, as a resident, you have more understanding of the residential real estate market than the commercial one. You would also be better able to understand the business fundamentals when you loan someone money to rehab a house or invest in a real estate investment trust over buying shares in a new commercial property.

Residential real estate is generally more liquid than commercial real estate. You’ll always have more buyers for a single-family home than a storefront. You’ll have more potential investors for a small triplex or ten-unit apartment building than for a strip center.

Tax Benefits of Residential Real Estate Investment

Tax Benefits of Residential Real Estate Investing

Property taxes do affect profit but it highly depends on whether you are a professional or a passive investor. If you are a professional investor, your losses are fully deductible against all income; otherwise, it is only deductible up to $25000 against your rental income. This incurred loss which exceeds $25000, can be carried forward to the following year.

Operating expenses such as mortgage interest, property management fees, property taxes, and repair & maintenance can all be claimed as deductions against rental income.

Real estate profits are not taxed until you sell the property. For example, if you purchase a home for $150,000 and it appreciates to $200,000, the $50,000 gain is protected from taxes until you sell the property.

Rental property owners may assume that anything they do on their property is a deducible expense, but that is not true according to the IRS. The money you receive for rent is generally considered taxable in the year you receive it, not when it was due or earned; therefore, you must include advance payments as income.

Benefits of Commercial Real Estate Investment

Commercial real estate investment can be much more profitable than residential real estate. For example, you can charge much higher rents per square foot in desirable properties, because the tenants are generating revenue from the property. You may be able to reduce your expenses by offering a modest discount on the rent in exchange for a triple net lease.

If they pay the insurance, property taxes, and rent, you’ve dramatically reduced your bookkeeping labor and your expenses. Just make sure they actually pay the insurance and property taxes. If you already run a commercial business, the commercial side of residential vs commercial real estate investing is the better choice for you. You could start by subleasing offices or a corner of your storefront.

You might lease half of the store to a complementary business. If you move into a larger building, you may get experience in commercial real estate by subleasing space before you use it. This sets you up for success on the commercial side of the residential vs commercial real estate investing debate. Buy your building and sublease it out, and you’re on the commercial side of the residential vs commercial real estate investing argument.

Commercial properties tend to be expensive, whether someone is building an office building or mega-mall. This leads many commercial property developers to issue shares. This is why you find as many or more commercial property real estate investment trusts than residential ones. Residential real estate investment trusts exist, though they tend to focus on apartments over single-family homes.

Commercial REITs typically have a higher rate of return, and this form of commercial real estate investing is more liquid than either shares of a commercial property or ownership of a single-family home. Commercial real estate investment can often give you more flexibility. When you buy commercial REITs, you can choose funds that specialize in medical real estate, office space, or other niches.

And you can choose to focus on a particular niche, as well. Upgrade a storefront and aim at a particular industry when seeking renters. Rehab offices near a hospital and cater to medical service providers. Conversely, you could snap up a building that has a particular purpose such as a restaurant, revamp it, and rent it out to a more successful chain in the same industry. You can choose which industry you cater to by choosing the property.

Should You Invest in Residential or Commercial Real Estate?

If you don’t have experience in real estate investing, we recommend residential real estate. If you have experience managing commercial properties, then commercial wins over residential real estate investing. If you have limited cash or low-risk tolerance, then we recommend residential vs commercial real estate.

Let’s go through the two main guidelines which are inevitable if you wish to succeed in residential real estate investing.

1. Look For a favorable Growth Market

If you are a seasoned real estate investor, you will definitely have importance for a healthy market environment, but if you are a newer investor, you will need to shed some light on this factor. It can go even worse if you have purchased a property with an adjustable-rate mortgage because sometimes the interest rates keep rising and you will end up paying more even if you can’t afford it. Such situations alleviate the demand for the entire real estate market in particular locations.

2. Always Be Particular About The Location of Investment Property

If you find a location with falling interest rates, manageable GDP growth, and good employment rates, then you can start looking for a smart property to invest in. Analyze and research the location before investing in any residential real estate property.

Types of Residential Real Estate Investing

Well, the desired investment is found in an ideal city that is expanding in many different factors related to the real estate market. If after proper analysis, you find the market conditions look vague, it is recommended to play safe by sticking to a particular location that is familiar to you.

1. Fix and Flip

Fix and flip is a great choice if you have been in the business for a long time, or consider consulting a real estate investment adviser to get proper guidance. You need to cherry-pick the best deals from real estate auctions, hire contractors to rehab the properties, and sell them for top dollar to an investor. Rehabbing a property adds value to it.

When you buy a property to fix and flip, the increase in its value is significant and you can profit by selling it immediately. Renovating the property will reap great profit (when you sell it). Most investors don't have the ability or time to take every necessary step an accomplished fix and flipper can, and will happily pay more to get a property that doesn't require rehab.

2. Rental Property Investment

Yes, you should go for a single-family rental home if you are looking for a small and affordable investment. It is easy to exit, unlike a multi-family rental property which will make you think twice due to heavy investment. Managing a rental property is quite simple if you hire an efficient property management team around the city.

They not only maintain your property but also help you in finding the best-suited tenant who is vetted and would less likely default on timely rent payment. Click on the link to know How To Buy Rental Properties With No Money Down.

Location is an inevitable factor in the residential real estate investing business it is further linked to various factors like employment opportunities, population, and affordability (which determines profit). Below listed are few locations which will justify this statement and further motivate you to look out for the best location to invest in residential real estate.

Your first investment property can be quite lucrative if you prepare adequately. Before starting in Real Estate Investment, do research all about the property and location a lot. Using a real estate agent can help you a lot in real estate investing. The benefit of using a real estate agent is that they have a formal education, years of experience, and neighborhood knowledge.

An agent will help in price negotiation, give you market conditions and forecasts. A real estate agent will help the buyer in finding the right property at a good price which is a critical factor to succeed in real estate investment. While hiring an agent you must find out how many transactions do they close a month/year. How much is the commission? (If you are a seller. Buyers aren't charged commission.)

How popular is their website and where do they usually get their leads? How long have they been a realtor/agent? It's also very important to check if they can respond to your questions/requests within a reasonable amount of time. Another tip, look at different Realtors in your area and compare them.

You will find their reviews on sites like Zillow.com and Realtor.com. Most real estate agents stay in business because satisfied clients refer them to friends, family, neighbors, and coworkers. Ask the people around you who they have used and ask them to describe their experiences with that real estate agent.

For 2021, real estate market analysts agree that the outlook is very bright, particularly in certain markets. Different experts will give you different opinions on which market is the best, but most top ten lists have many of the same cities listed. For instance, some experts list expensive markets like Sacramento and San Jose Metro Areas as their top picks while some have Las Vegas at the top of its leader board.

Other cities that are lucrative for investing include Dallas, Nashville, Raleigh-Durham, and Salt Lake City. Each city has assets that make it attractive to new residents and new investors. Those assets add up to a very bright future for the real estate market in their specific area. The market information for these cities is based on predictions and forecasts for 2021.

If you are interested in buying rental properties and portfolios at this time, you can choose the Houston Housing Market. Houston has everything: the people, the diversity, the business climate, being world-renowned in energy, medicine, space, and manufacturing, and above all a booming real estate market.

1. Benefits of Residential vs Commercial Real Estate Investing in Las Vegas

Las Vegas is a much lower cost of living area and features very good investment potential as well. Median home prices are at $285,045 with sales growth rising at 4.9% and prices increasing at 6.9%. The economy in Las Vegas is growing at 8.7% compared to 6.4% growth for the rest of the top 100 cities.

The high demand was followed by an increase in population, as well as an overall improvement of the economy in the area. All these factors have had a huge impact on the Las Vegas housing market, which is considered one of the hottest markets in the US at the moment.

Some of this growth is being fueled by California residents who have sold more expensive homes, maybe due to retirement, and are looking to move to a lower cost of living area. They have a lot of cash from the sale of those more expensive homes that they can spend in the Las Vegas real estate market.

2. Benefits of Residential vs Commercial Real Estate Investing in Seattle

Seattle housing market is another area with continued strong growth. Amazon has plans for expansion projects that would occupy 12.8 million square feet by 2022. Other large-scale projects either newly completed or under construction, help explain the 100,000 new residents since 2010, with most of those coming in the last four years.

Those factors help position Seattle with 102,212 job openings to go along with a median household income of $78, 623 and a home value growth forecast of 5.4%. Median home prices are at $650,000, up $200,000 since 2014. Filling those job openings will continue to bring new residents to the Seattle area, which is a good sign for the residential real estate market.

Seattle home prices rose faster in October 2019 than they have for a year. In Seattle, October prices rose 3.3% from a year ago, to $775,000 — the largest percentage increase in 12 months. Tacoma was crowned the nation’s hottest housing market in May. Since then, other midsize cities in Washington state have overtaken their growth.

3. Benefits of Residential vs Commercial Real Estate Investing in Denver

Denver housing market shows attractive investment potential. The Denver real estate market hasn’t fully transitioned into a buyer’s market yet. But it’s shifting in that direction. Despite the big gains in housing stock, the Denver area is still very much a seller’s market. Denver-area home prices are holding steady year-over-year and inventory is increasing significantly.

The number of homes for sale in the Denver metro area was up significantly in April 2019 and the median sold price remained unchanged year-over-year, according to the latest data from the Denver Metro Association of Realtors. The tech industry continues to expand, attracting well-paid employees to fuel the growth of the real estate market. Any time you have an expansion of this nature, it drives residential real estate purchases and helps increase property values.

The median home value in Denver is $422,400. Denver home values have gone up 1.4% over the past year and their Denver real estate market prediction is that the prices will fall -0.3% within the next year. The median list price per square foot in Denver is $375, which is higher than the Denver-Aurora-Lakewood Metro average of $268.

The median price of homes currently listed in Denver is $475,000 while the median price of homes that sold is $420,900. The median rent price in Denver is $2,195, which is higher than the Denver-Aurora-Lakewood Metro median of $2,100.

4. Benefits of Residential vs Commercial Real Estate Investing in Portland

Portland comes in with a median household income of $68,676 and 44,845 job openings. The median home value is at $370,700 with an increase of 3.7% forecast. One of the things that will fuel Seattle’s growth is the development of the Zidell yards.

This 33-acre industrial site in the South Waterfront district is set for redevelopment. Plans include several parks, plazas, 2200 residential units, and a waterfront. Nike is planning a 1.3 million-square-foot expansion and there are other expansion products in the city.

5. Benefits of Residential vs Commercial Real Estate Investing in Dallas

The population of Dallas is expected to double in the next 15 Years. It is one of the leaders in the U.S. for employment and population growth. 52.9% of Dallas rents vs. 33% nationally. You will find newly remodeled REOs (2004 or newer). Turnkey rental properties are available at 5% – 15% below market value with a 3-year appreciation forecast of 11.4%.

You should invest in Dallas real estate because Zillow.com ranked Dallas at number 12 on the list of the best places to live in the country in 2017. Dallas housing market is shaping up to continue the trend of the last few years as one of the strongest markets in the United States.

According to Zillow.com, the median home value in Dallas is currently $213,400. Dallas home values have risen by 8.1% over the past year and their Dallas real estate market forecast is that the prices will continue to rise by 4.5% within the next year. 

Dallas’s local economy is a mix of aerospace, computer chips, telecommunications, transport, energy, and healthcare sectors and the Finance and Business Services. These sectors are all providers of good wages which allows for a strong market for Dallas investment properties. For a more in-depth review of the Dallas Real Estate Market, click the link.

6. Benefits of Residential vs Commercial  Real Estate Investing in Atlanta

Located in the state of Georgia, the city of Atlanta is a hotspot for any type of real estate investment. Atlanta has shown promising population growth and employment, which are two signs of a healthy real estate market. You can purchase investment properties in Atlanta for as low as $127,000. Comparing that to the national average, which is $152,000, that’s a pretty significant deal!

Atlanta is one of the top rental markets in the U.S. You can get newly rehabbed properties with tenants. The price of the properties starts at $70,000 with up to $750/mo cash flow. 500 people move to Atlanta every day! 2 million more people are expected by 2030. Real estate properties have a 3-year appreciation forecast of 9.3%. For a more in-depth review of the Atlanta Real Estate Market, click on the link.

7. Benefits of Residential vs Commercial  Real Estate Investing in San Jose

San Jose looks to have a median household income of $110, 040 and a median home value of $1,128,300 with an increase of 8.9% in home value. Unemployment is extremely low and there is a lot of job availability, making this a very attractive real estate market.

If you are an investor, San Jose real estate has a proven record of being one of the best long-term investments in the country. Based on the last twelve months, real estate investors in San Jose, CA have found very good returns. Any housing market will see a large and generally well-funded population of renters if there is a university in town.

San Jose has several that attract students from around the world. Investors in the San Jose real estate market could buy up properties to rent out to the thousands of engineering and computer graduate majors attending the University of California Berkley campus, UC Santa Cruz, Stanford University, Santa Clara University, and California State University.

8. Benefits of Residential vs Commercial Real Estate Investing in Orlando

Orlando has added more than 1,73,900 jobs since the recession with a growth rate of 3.2% every year for the next 10 years. Over the past 5 years, it has grown 217% faster with the increasing job opportunities. Even if this place is one of the most popular locations which is in demand for real estate, you can still find affordable and spacious houses.

Orlando housing market is shaping up to continue the trend of the last few years as one of the strongest markets in the United States. The Orlando real estate market forecast is that the prices will rise by 8% to 10% in 2021. Orlando is the new hub for many young professionals especially those with various types of technological expertise, including engineers and IT professionals.

This city has experienced annual job growth of around 4.4% and is also one of the fastest-growing metro areas in the country. The city is also set to experience its highest job growth rate in the 10 years to come. A market with high job growth is a great market for real estate investment as well within the next year.

9. Benefits of Residential vs Commercial Real Estate Investing in Tampa

Tampa metro area is considered among the top-performing cities in the US. It is listed in the top 20 fastest-growing metros in the US. It has 4 million people and has the potential to cater to more migrants. Tampa real estate may look a bit pricey, but if you make a detailed analysis before investing you can get hold of deals as low as $90,000. There are several nature parks, landmarks, museums, and eateries for tourists to visit in Tampa.

Tourist influx also means an increase in short-term residential contracts, which is a selling point of the Tampa real estate market in 2018. Main tourist attractions include Big Cat Rescue, Busch Gardens Florida, Eureka Springs Park, and Tampa-Bay History Center among many others. Growing tourism has a tremendously positive effect on the real estate in Tampa FL.

10. Benefits of Residential vs Commercial Real Estate Investing in Jacksonville

Jacksonville, Florida is ranked 3rd in Forbes magazine in terms of job availability. The population has increased 24% since 2000 and continues to grow 2% every year. Here the price is too reasonable and as low as 23% compared to the national average. Hence, Jacksonville is highly recommended for investing in residential real estate.

Commercial vs Residential Real Estate: The Conclusion

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process.

They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.

This article aimed to educate investors who are keen to invest in residential real estate in 2021. Investing in real estate requires a lot of studies, planning, and budgeting. Not all real estate is solid long-term investments. We always recommend doing your own research and take the help of an expert counselor.

References

  • https://www.biggerpockets.com/blog/NNN-deal
  • https://www.investopedia.com/articles/mortgages-real-estate/10/real-estate-investment-trust-reit.asp
  • https://www.biggerpockets.com/member-blogs/1395/11003-triple-net-lease-properties-returns-are-more-favorable
  • https://www.forbes.com/sites/marcprosser/2017/07/19/data-proves-reits-are-better-than-buying-real-estate/#3fe75799d6b7
  • https://www.investopedia.com/articles/mortgages-real-estate/09/residential-real-estate-invest.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186

The Rich vs Poor Mindset: Which Mindset Do You Have In 2022?

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What is the difference between the rich vs poor mindset? How do the successful differ from the rest of us? So many people do not obtain financial freedom because they do not have one thing: the right mindset. Everything starts with how you think about money, wealth, and success. It is not a matter of luck, birth, or connections.

The biggest differences between rich and poor people can be traced back to mindset, outlook, and behavior. The rich and the poor don’t only differ in how much they have in their pocket, but also in how they think. Rich people have a way of thinking that is different from poor and middle-class people.

They think differently about money, wealth, themselves, other people, and life.  By doing so, you will have some alternative beliefs in your mind from which to choose. In this way, you can catch yourself thinking as poor people do and quickly switch over to how rich people think.

A positive attitude, focusing on doing the right thing overlooking good, becoming a continual learner and careful risk management are all differences between the rich and poor. This reduces their odds of becoming poor after disaster strikes, and it helps them achieve their financial goals over the long term.

A rich mindset will tell you to be self-sufficient & build multiple streams of income. It will tell you to build a team of smarter people than you to leverage the efforts of talented people. The mindset of the rich is the most decisive reason why “the rich keep getting richer, while the poor get poorer.” Bill Gates has been quoted as saying, “If we weren't still hiring great people and pushing ahead at full speed, it would be easy to fall behind and become some mediocre company.”

So, which mindset do you have? Let's examine twelve startling differences between how rich people think and how poor or middle-class people think.

Rich vs Poor Mindset

1. Rich People Believe “I Create My Life”

rich vs poor mindset

Poor mindsets believe “Life happens to me.”

If you want to create wealth, it is imperative that you believe that you are at the steering wheel of your life; that you create every moment of your life, especially your financial life.

Instead of taking responsibility for what's going on in their lives, poor people choose to play the role of victim. Of course, any “victim's” predominant thought process is “poor me.” And presto, through the law of intention that's literally what they get; “poor,” as in money, me.

Here's some homework I promise will change your life. For the next seven days, I challenge you not to complain at all. Not just out loud, but in your head too. I've given this little challenge to thousands of people and several hundred have personally told me that this exercise completely transformed their lives.

2. Rich vs Poor Mindset: Rich Play the Money Game to Win

 

Poor mindsets play the money game not to lose.

Poor people play the money game on defense rather than offense. Let me ask you, if you were to play any sport or any game strictly on defense, what are the chances of you winning that game? Most people agree; slim and none.

Yet, that's exactly how most people play the money game. Their primary concern is survival and security, not wealth and abundance. So, what is your goal? What is your real objective? What is your true intention?

Rich people's big goal is to have massive wealth and abundance. Poor people's big goal is to have “enough to pay the bills…” on time would be a miracle! Again, let me remind you of the power of intention. When your objective is to have enough to pay the bills, that's exactly how much you'll get; just enough to pay the bills and usually not a cent more. You get what you truly intend to get.

3. Rich Mindsets Are Committed to Being Rich

 

Poor mindsets are uncommitted to being rich.

Most of us have good reasons as to why it would be wonderful to be rich, but what about the other side of the coin? Are there reasons why it might not be so great to be rich or go through the process of trying to get rich?

Each of us has a file on wealth in our minds. This file contains our personal beliefs including why being wealthy would be great. But for many people, their file also includes information as to why being rich might not be so great. These people have mixed internal messages around money and especially wealth. These mixed messages are one of the biggest reasons that most people never become rich.

The #1 reason most people don't get what they want is they don't know what they want. Rich people are totally clear they want wealth. They are unwavering in their desire. They are fully committed to creating wealth. They will do “whatever it takes” to have wealth as long as it's moral, legal, and ethical. Rich people do not send mixed messages to the universe. Poor people do.

I hate to break the news to you, but getting rich is not a “stroll in the park.” It takes focus, expertise, 100% effort, and “never say die” perseverance. You have to commit to it, both consciously and subconsciously. You have to believe in your heart you can do it and you deserve it. If you are not fully committed to creating wealth, chances are you won't.

4. Rich vs Poor Mindset: Rich People Think Big

 

Poor people think small.

We once had a trainer teaching at one of our seminars who went from a net worth of $250 thousand to over $600 million in only 3 years. When asked his secret he said, “Everything changed the day I began to think big.”

Another way of understanding this is to answer the following question: How many people do you serve or affect?

For instance, in my business, some trainers enjoy speaking to groups of 20, others are comfortable with 100, others like an audience of 500, still others want 5000 people or more in attendance. Is there is a difference in income between these trainers? You bet there is.

Who are you? How do you want to live your life? How do you want to play the game?

Do you want to play in the big leagues or the little league, in the majors or the minors?

Will you play big or play small? It's your choice.

But hear this. It's not about you. It's about living your mission. It's about living true to your purpose. It's about adding your piece of the puzzle to the world. It's about serving others.

Most of us are so stuck in our egos that everything revolves around “me, me, and more me.” But again, it's not about you, it's about adding value to other people's lives. It's your choice. One road leads to being broke and miserable, the other leads to money, meaning, and fulfillment.

It's time to stop hiding out and start stepping out. It's time to stop needing and start leading. It's time to start being the star that you are.

5. Rich Mindsets Are Bigger Than Their Problems

 

Poor people are smaller than their problems.

Getting rich is not a stroll in the park. It's a journey that is full of obstacles, twists, and detours. The simple fact is, success is messy. The road is fraught with pitfalls and that's why most people don't take it. They don't want the problems.

Therein lies one of the biggest differences between rich people and poor people. Rich and successful people are bigger than their problems while poor and unsuccessful people are smaller than their problems.

Poor people will do almost anything to avoid anything that looks like it could be a problem. They back away from challenges. The irony is that in their quest to make sure they don't have problems, they have the biggest problem of all… they're broke and miserable.

The secret to success is not to try to avoid or shrink your problems; it's to grow yourself so you're bigger than any problem.

It's just an everyday occurrence, like getting dressed or brushing your teeth. Whether you are rich or poor, playing big or playing small, problems do not go away. If you're breathing, you will always have so-called “problems.”

What's important to realize is that the size of the problem is never the real issue. What matters is the size of you!
Remember, your wealth can only grow to the extent that you do! The idea is to grow yourself to a place where you can overcome any problems that get in your way of creating wealth and keeping it once you have it.

Rich people do not back away from problems, do not avoid problems, and do not complain about problems. Rich people are financial warriors and when a warrior is confronted with a challenge they shout: BRING IT ON!

6. Rich vs Poor Mindset: Rich People Focus on Opportunities

 

Poor people focus on problems. Rich people see an opportunity in every situation and work to explore it. 

Rich mindsets see potential growth. Poor mindsets see potential loss.

Rich mindsets focus on the rewards. Poor mindsets focus on the risks.

We're not merely talking about “positive thinking” here, we're talking about a habitual way of seeing the world. Poor people come from fear. Their minds are constantly scanning for what's wrong or what could go wrong in any situation. Their primary mindset is “What if it doesn't work?” or, more bluntly, “It won't work.” Rich people, as we discussed earlier, take responsibility for creating their life and come from the mindset, “It will work because I'll make it work.”

In the financial world, as in most other areas, the risk is directly proportionate to reward; generally, the higher the reward, the higher the risk. People with rich mentalities are willing to take that risk. They work to exploit opportunities even when they don’t have the expertise for it.

Rich people expect to succeed. They have confidence in their abilities, they have confidence in their creativity and they believe that should the “doo-doo hit the fan”, they can always make their money back or succeed in another way. They look for ways to educate themselves to be better prepared for the task.

On the other hand, poor people expect to fail. They lack confidence in themselves and their abilities, and should things not work out, they believe it would be catastrophic.

You have to do something, buy something, or start something to succeed financially. You have to see profit opportunities all around you instead of focusing on ways of losing money.

7. Rich Mindsets Always Focus on Positive Attitude

 

Poor people lack a positive attitude.

Poor is a mindset. It is a lack of hope.

Dave Ramsey, the national best-selling author, once explained the difference between broke and poor is attitude. The broke have no money right now but have a positive outlook; they believe they can do better and can do better when they work toward doing something better. They think they’re doomed to remain in poverty. The little man can’t get ahead. The poor are oppressed by the rich.

They can’t save money because they think it will be taken from them, and they waste money they do save or receive as a windfall on pleasures because they don’t think they can do better by doing anything else. For example, when you think you can’t do better, you won’t finish that challenging degree program or take a second job to get out of debt because there is no point.

Or they think they can’t be wealthy because they believe the lie that most millionaires inherited their wealth and class. The truth is that 80 percent of the rich are the first generation, and less than 3 percent inherited enough to become millionaires.

A negative attitude can hinder those with even a good income. A classic case is being afraid of investing, so you leave money in savings or CDs and earn less than the rate of inflation. Another is seeing money as immoral, so they give it to charities and “needy” friends and family.

They have nothing themselves, ensuring they have no savings for their emergencies or retirement. This is why long-term financial success requires a positive mental outlook. Setbacks like unemployment or massive medical bills are seen as temporary and then worked through.

8. Rich Mindsets Do Not Flaunt Their Wealth

 

People with rich mindsets lead frugal lives.

The public perception of the rich is that they flaunt their wealth. We are lied to when they show “the rich” wearing designer clothes, taking fancy vacations they brag about, and having lavish parties. In reality, a very small number of the truly rich ever live this way, and most who do live this way are high-income earners who have almost nothing saved.

Once the windfall of a signing bonus or record contract is used up, they have nothing. Unfortunately, this image is compounded by marketing efforts to say you have to spend money this way to become rich. Yet wasting money on fancy cars, expensive trips and other trappings of success prevents you from doing so.

That perpetual 500 dollars month car payment and the largest house you could afford to prevent you from becoming wealthy. Most real millionaires live in a house they can afford, and they prioritize paying off the mortgage. They own their cars for years and avoid car payments, though they may buy a used luxury car and keep it running for ten years.

They are content with what they have while they build their businesses and portfolios. And they earn their money honestly. There is a popular myth that most millionaires are liars and cheats. One lie is that the rich don’t pay their taxes, though the top 1 percent pays 40 percent of the taxes.

Another lie is that the rich are dishonest scammers, that they only got wealthy by hurting others. In reality, surveys show that the number one trait of millionaires that they consider key to success is integrity. You can’t stay in business if you’re known for scamming customers or being sued for fraud all the time. Nor can you create the quality relationships that are necessary to build a business network if you’re a liar or cheat.

9. Rich Mindsets Understand The Value of Education

 

Poor mindsets are oblivious to the importance of constant learning or education.

Rich mindsets learn and update their skills throughout their lives.

Education remains a major determinant of lifetime income. Note that this doesn’t mean you have to go to an expensive private college or earn an advanced degree. However, you nearly guarantee you’ll be poor if you don’t finish high school.

One difference between the rich vs poor mindset is that the rich understand the value of knowledge. They’re not part of the 40 percent of adults who don’t crack open a book after graduating high school. They’re reading industry publications to learn more about their field and excel at work.

They’re reading about money management and personal development so that they do better in life. They’re constantly learning. They’ll ensure that they keep up their certifications, and they’ll proactively earn additional certifications to qualify for raises and promotions.

10. Rich Mindsets Are Better At Risk Management

 

Poor mindsets often live in fear of taking new risks.

The rich aren’t gambling with their money, whether it is taking trips to the casinos or taking big risks with penny stocks. They are careful to manage risk. One way they do this is by having the right insurance coverage. They have life insurance, health insurance, and disability insurance so that a personal disaster doesn’t wipe them or their families out. They won't just start a business or investment without analyzing its profitability.

They have emergency funds with several months of savings so that they can cover a major unexpected expense without having to go into debt. They prioritize protecting themselves over spending money on wants. This doesn’t mean they don’t invest in stocks or real estate. It means they do their homework before investing money.

They research the properties and the costs to rehab and sell them before they buy. They research stocks or mutual funds before putting in their money. Educating themselves about various subjects reduces their risk level. And that is why one of the differences between the rich vs poor mindset is that the poor often live in fear of catastrophe, while the rich expect to be able to weather the storm.

11. Rich vs Poor Mindset: Rich People Build Multiple Streams of Income

 

Poor people have one stream of income – their job. 

Poor people put all of their eggs in one basket by being dependent on one stream of income.

The wealthy are known for their work ethic, but there are plenty of people who work hard but remain in poverty. There are several ways the rich work differently. One is that they devote time to planning their financial future. They save for retirement so that they have a passive stream of income before they have to retire from their job.

They aggressively pay down debt and avoid taking on new debt so that their income goes further. They dedicate time to handling their investments while investing every month, whether it is in a 401K or rental properties. If they own a business, they capitalize on it to generate additional income.

It might be licensing intellectual property or renting out one of the suites to generate additional revenue. They may hold a day job but teach or consult on the side to earn additional income. This can be a form of risk management, too, since it gives them a head start if they lose their job or simply want to start their own full-time business.

12. Rich Mindsets Believe in Saving, Investing, And Multiplying

 

Poor mindsets splurge on materialistic things. 

Poor people end up saving nothing to invest.

Rich mindsets save, save, save. They save 10% to 20% of their net income every year. The rich are intentional. They don’t put off saving for the future. They start saving with every paycheck, and they choose not to splurge so they can make that next 15 percent contribution to retirement.

They don’t say they’ll pay off the debt later. They create a plan to pay down debt and follow it, month after month until they’re debt-free. According to “The Millionaire Next Door” and Chris Hogan’s follow-up book “Everyday Millionaires”, most millionaires by net worth either follow a budget or deliberately send a set percentage to savings and live off the rest.

In short, they devise plans and follow them. They set goals, and by focusing on them and constantly working toward them, typically achieve them. Note that it isn’t just money. This is why the wealthy are less likely to be overweight, too. If you’re already used to consistently working toward financial goals, an exercise and diet plan is just one more plan to follow.

Remember, for anyone to cross the line from poverty to wealth, you need to have a change of mindset. If you want to get rich, then you need to change your mindset and begin to see things from the perspective of the wealthy. Hope you liked this article! 

References:

Mindset/Attitude
https://www.youtube.com/watch?v=FdnhKJG6bYk
https://www.businessinsider.com/rich-people-are-positive-2016-4
https://www.thebalance.com/secrets-of-the-invisible-rich-1289824

Intentionality
https://www.chrishogan360.com/investing/how-to-become-an-everyday-millionaire
https://www.healthcare-administration-degree.net/poverty-obesity/

Being Good, Looking Good
https://www.businessinsider.com/how-to-define-wealth-formula-the-millionaire-next-door-2019-https://www.daveramsey.com/blog/millionaire-myth-busters

Education
https://www.kiplinger.com/slideshow/saving/T047-S001-10-secrets-of-the-millionaires-next-door/index.html

Multiple Streams of Income
https://www.getrichslowly.org/nine-lessons-in-wealth-building-from-the-millionaire-next-door/
https://thecollegeinvestor.com/5656/5-millionaire-neighbor-telling/

The Important Tax Benefits of Real Estate Investing

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If you are planning on increasing your wealth, the best investment to deal with is real estate. Investing in real estate has some incredible tax benefits. Other benefits are an increase in property value due to appreciation and good cash flow in the form of rental income. It is easy to find the lists of these tax benefits of real estate investing, like the ability to deduct nearly every expense associated with the real estate or how to qualify to exclude from your income all or part of any capital gain from the sale of your main home.

However, it is equally easy for someone to inflate or conflate various tax benefits given by the IRS. Investors dealing in real estate get the maximum tax benefits in the name of deductions, which we'll discuss in detail. Deductions that are accounted for can be depreciation, property tax, repairs, or any other form of expenses. These breaks in taxes are helpful to a lot of people dealing with real estate as their full-time business. Let’s look at the top tax benefits of investing in real estate using hard numbers. This is the basic introduction to how tax benefits in real estate work.

The average home in the United States costs around 220,000 dollars. Yet many people don’t need a three or four-bedroom single-family home. Nor should you pay that much for an investment property. A good rule of thumb for investors is to pay no more than 70 percent of the ARV or After Repair Value of the property.

We’re going to use a property purchased for 130,000 dollars. This may be a small starter home in an average neighborhood or a full-sized home in a working-class neighborhood. The house would then be worth around 185,000 fixed up if we were going to pay cash for the repairs. You don’t want to overpay for the property.

  • Determine how much the property would rent for it after repairs.
  • Divide that by the property value.
  • You want a 1 percent rate of return at a minimum.
  • This means that if you can rent the property for 1600 dollars a month and have 300 dollars a month in expenses, your net revenue is 1300 dollars a month.
  • On a 130,000 dollar starter home, this is a 1 percent ROI and makes it a good deal.
  • If the property costs 130,000 dollars now but requires 20,000 in repairs, it probably isn’t worth it unless you’re going to sell it soon to capture the increased equity.
  • Don’t forget to factor in expenses like property management fees, property taxes, and insurance if you’re going to hold onto the property in addition to expenses like the mortgage.

Tax Benefits of Real Estate Investing

Suppose you want to buy a 130,000 dollar house with 20 percent down. That means the down payment is 26,000 dollars. This results in a mortgage of 104,000 dollars. We used a mortgage calculator assuming a 104,000 dollar mortgage at 5 percent over 30. This results in a monthly payment of 558 dollars a month. As a real estate investor, your mortgage interest becomes tax-deductible, while payments toward the principle are not. This makes nearly all of the roughly six hundred dollar house payment a business expense you can write off.

Because you put 20 percent down on the property, there is no PMI or private mortgage insurance.

However, property insurance will be tax-deductible, too. Homeowner's insurance ranges from 1 to 2 percent a year. If we assume a 1 percent homeowner's insurance policy, the premiums are 1200 to 1300 dollars a year. Property management fees are tax-deductible business expenses. If the rent on our 130,000 investment property is 1300 dollars a month, you’ll pay roughly 130 dollars a month or 1560 dollars a year for someone else to collect the rent.

All the costs associated with property acquisition can be written off. This list includes title insurance, legal fees, real estate agent commissions, transfer taxes, back taxes, and closing costs. Don’t be afraid to hire a real estate attorney if it helps you avoid major mistakes. The cost of asking a professional about the tax benefits of investing in real estate is tax-deductible, too.

Property taxes vary wildly across the country. Some states lack a property tax, while the rate may be negligible on rural properties. The average property tax rate in the US is 1.2 percent. This translates to a $1,560 property tax bill for homeowners. Unfortunately, that’s factoring in the homestead exemption property tax investors don’t get.

Assume a $2,000 to $2,400 a year property tax bill. The property taxes you pay offset the potential income taxes you would owe if your real estate properties are held by an LLC. Or they’re treated as a business expense for you as a private investor, reducing the taxable income you’ll owe on the property. Note that you’ll still enjoy the same tax benefits of real estate investing if it is held in a private LLC as held in your name.

What Are Tax Benefits of Real Estate Investing?

Everyone pays property taxes, but how much tax you pay can be reduced by utilizing certain tax breaks available in real estate. Let's now discuss each of these tax benefits in detail and how to use them to maximize your savings.

Depreciation

What is Depreciation?

One of the greatest tax deductions real estate investors enjoy is depreciation. Like any other asset residential real estate is also an asset that breaks down over time. Depreciation is a deduction taken on materials that break down. The IRS uses depreciation to acknowledge that an asset wears down over time. It is like an allowance given for exhaustion or wears and tear of the property, including a reasonable benefit for obsolescence. Depreciation is charged in different years for residential and commercial property. For residential properties, it is calculated in 27.5 years, and for commercial, the same is 39 years.

It is an incredible benefit given by the IRS to real estate investors. Even though anything that breaks down on the property can be deducted, we all know that property values generally go up over time. Therefore, depreciation on real estate is often known as a “phantom deduction” because although we deduct the cost, the actual loss never really occurs.

How is Depreciation Calculated?

Depreciation is charged by the method named (MACRS) Modified Accelerated Cost Recovery Method. In MACRS the residential rental property and structural improvements are depreciated over 27.5 years, while appliances and other fixtures are depreciated over 15 years. Whatever is the cost of your residential property (excluding the cost of the land), it will be spread out over 27.5 years and deducted every year.

Note that you can only depreciate the building, not the land.

For simplicity’s sake, we’ll say the land is worth 30,000 dollars while the house is worth 100,000 dollars, which will be spread out over 27.5 years.

This means you would divide $100,000 by 27.5 = 3636.36.  Hence, you can deduct $3636.36 every single year for the next 27.5 years on your investment property.

And that much of the profits from the property are shielded from income taxes because it is offset by the presumed losses from depreciation. This is separate from the tax-deductibility of actual repairs like replacing the roof or dead air conditioner.

If you made major improvements to the property, such as the fixer-upper scenario, those improvements are included in the depreciation. If you bought the house for 130,000 dollars and made repairs and renovations that made it worth 180,000 dollars, you have an additional 50,000 dollars of cost basis to use for depreciation purposes.

Note that minor repairs like a new hot-water heater or patched roof don’t count in depreciation.

Important Tips About Using Depreciation as a Tax Benefit in Real Estate 

  • Depreciation will start the moment the property is officially available for occupancy.
  • This means depreciation doesn’t start the day you bought the property but the day you started trying to sell it or find a renter.
  • Conversely, it means you can claim depreciation even if the property is vacant for several months.
  • Depreciation ends if you sell it, exchange it or retire it from service as a rental property.
  • For example, you can’t claim depreciation if you move into it and make it a permanent residence.
  • The catch in depreciation as a tax benefit of real estate investment is that when you sell the property, that entire deducted amount may be taxed at a 25% rate, in addition to any other capital gains taxes.
  • However, if you didn’t make money on the sale, then IRS will not tax your old depreciation amount.

Lower Capital Gains Tax

Capital gains are the profits you make when you sell a property. One of the tax benefits of real estate investing is that there are lower taxation rates on your capital gains. The gains that investors get from selling their investment property for sale are termed capital gains which are of two types as mentioned below.

Low tax rates on capital gains are an advantage if you build your long-term investment strategy around strategically selling real estate for growth or living expenses. Generally, in all tax brackets, capital gains taxes are considered better than the equivalent income tax on your ordinary income.

  • Short-Term Gains: The gains that are received from investment properties that are held for less than one year are called short-term gains. Investors have to pay tax according to the bracket under which they fall. There is no special tax benefit in real estate for short-term capital gains.
  • Long-Term Gains: The gains that are received from investment properties that are held for more than one year are termed long-term capital gains. The tax rate is lower in the long-term capital gains because of which investors prefer the latter over the former. The long-term capital gains tax is either 0%, 15%, or 20%, depending on what income tax bracket you are in.

1031 Exchange

As a real estate investor, you can use this tax code called 1031 Exchange to sell a property and use the profit to buy a new one that is of equal or greater value. In this way, you can defer paying taxes until that next property is sold or you can opt for another 1031 Exchange. When you choose to sell your property, you are required to pay taxes for your capital gains.

With the help of section 1031 of the Internal Revenue Code, you are permitted to postpone paying taxes when you reinvest those gains in another property. IRS considers that you are exchanging your old property for another real estate property. This is one such type of swap in which there is no tax paid; it is deferred legally.

Here are some of the factors which the 1031 exchange must meet.

  • The property which has been replaced and the property or properties bought in its place must have the same or greater value.
  • The IRS requires that you identify the property you plan to buy within 45 days and you also must close on that property within 180 days.
  • The properties included in the transaction must be similar. A real estate property cannot be exchanged for some other type of asset, such as a real estate investment trust (REIT).
  • The exchanged properties should be used for any productive purpose in business such as for investment.
  • Any cash or property received through the transaction that is not considered like-kind property is considered boot and is subject to taxation. Therefore, you can touch the cash. You must use an intermediary who will hold onto the cash while you wait to close on the new deal. If you do want to take out some of the profit, that amount will be taxed.

No FICA Tax

The Federal Insurance Contributions Act helps in the splitting of tax between the employee and the employer, and the rate of tax is 15.3%. If you are self-employed and have no employer, you are responsible for the full 15.3%, which is known as Self-Employment Tax. Now you might be thinking what is the tax benefit here for real estate investors?

The US Government does not currently look at rental real estate as a job or self-employed business. Therefore, a rental property income is not generally taxed as “earned income” and does come under FICA. Remember, it depends on how you earn from real estate. If you own a holding company and draw a salary, you would come under FICA.

Tax Benefits From Refinancing Your Mortgage

Refinancing is also considered one of the tax benefits of real estate investment. Exchanging your old mortgage with a new one at a new interest rate is known as Refinancing your Mortgage. Refinancing provides the borrower with fresh money at lower interest rates due to which the homeowner can lower his/her monthly payment amount.

As he/she obtains the loan at a lower rate of interest and consolidates all the debts, he/she now has to pay only one loan amount, which is obtained at a lower rate of interest and is left with some cash in hand. You don’t need to pay taxes on this. You’ll need to pay taxes when you sell the property, but you can use that money right now with no tax at all. The cash in hand after refinancing is non-taxable.

How Do You Take Advantage of These Tax Breaks?

The simplest approach is to document all of your expenses from property repairs to ongoing maintenance to insurance to taxes. Track one-time expenses like the cost of listing it for rent or sale. Your accountant will total up these expenses to determine your total business expense write-off. More importantly, what you pay your attorney or accountant to manage your business is also a tax-deductible business expense. The costs of acquiring and fixing up a property occur on a case-by-case basis.

Let’s jump to the tax calculations for the second year of ownership. We’ll use conservative estimates, though you might keep costs down.

Property taxes – $2000 a year

Depreciation – $4000 a year

Mortgage interest – $6000 a year

Property management – $1560 a year

Repairs – $2000 a year

Insurance – $1300 a year

Legal and tax preparer fees – $500 a year

That totals up to $16,860 a year in expenses. We already estimated an income of $1,300 a month every month or $15,600 a year. In this case, you’d owe no income tax on the property. If you were charging $1,500 a month in rent, you’d pay a little more in property management fees but only have to pay income taxes on $2,000 a year. In reality, you’re clearing closer to $6,000 a year, because you aren’t paying for the property’s depreciation. Know that these are rough, back-of-the-envelope calculations regarding the tax benefits of real estate investing. The costs and benefits of owning a particular property should be done on a case-by-case basis.

How Can You Lower Your Tax Bill as a Real Estate Investor?

Hold the property for more than a year to reduce capital gains taxes on the property’s appreciation. This makes a fix and rents a better strategy than flipping houses. You could even buy run-down properties, fix them up, manage them for 13 months, and then sell them to another investor. Just don’t get yourself classified as a dealer instead of an investor, because the self-employment category will double your FICA taxes.

Another option is owning the property as a legal liability corporation. You can receive the profits from the LLC, but you are personally shielded from lawsuits. You have some control over when you sell the property or pay the property taxes. Run the numbers. You might want to delay paying the property tax bill until January next year to offset the profits if you had a major repair bill this year.

If you sell the property, you’ll owe capital gains taxes. A like-kind exchange under Section 1031 of the tax code allows you to defer paying these taxes. Always work with a good real estate tax advisor to handle such a rollover. Another option is selling the property to the tenant or another investor under an installment deal. It lets you write off the value of the property with each installment, though you run the risk of only owning half a house if they default.

In theory, you can reduce your tax bill by borrowing against properties you own to buy new properties rather than selling them, too. On the other hand, you don’t want to pay more for repairs, services, or financing to get a tax write-off. For example, you’re not saving money if you pay the bank an extra 1000 dollars to get a 250 dollar tax write-off.

Set up a dedicated home office that you only use for work. Then you can deduct part of your mortgage and utilities as a business expense. Get organized. For example, you should keep track of mileage and travel costs, so you can include them as business expenses on your taxes. Document what you pay to attend real estate investing seminars or software you buy to run your business.

For simplicity’s sake, set up a bank account that is only used for managing rental properties. Rent is deposited into the account, and you only pay expenses for the rental properties out of that account. Then you don’t accidentally try to write off personal home repairs. However, this approach does make it difficult to write off a home office.

Concluding Thoughts on Tax Benefits of Real Estate Investment

Real estate investing enjoys many tax benefits. It is one of the most tax-advantaged investments compared to other investments. It depends on the investors and how they utilize these investments to the best of their advantage. It requires careful planning and effort to maximize your tax deductions while remaining in compliance with the complex regulations involved.  One can attain financial freedom by learning the right way to invest in the real estate industry. It is wise to hire a good CPA or tax expert who will save you more money than they cost. They will help you in plotting your tax strategy because the US tax code is quite complex and it is difficult to understand all the rules and regulations.

Tax Benefits of Real Estate: Places Where You Can Reap Maximum Benefits

Here are some of the best states in the U.S. for owning a property. This list takes into account median home values as well as state and local tax rates, including income tax rates, and property taxes as a percentage of market value or assessed tax value (whichever is applicable). If you buy a property or live there, it’s an excellent investment. We have listed each state's effective property tax rate, median home value, and calculated annual taxes on median home values —for an easier understanding of these tax rates.

The tax rates have been taken from Smartasset.com and median values have been taken from Zillow.com.

1. Alabama

Alabama has both a low tax rate and home prices that are well below the median home value in the U.S. For residential property, the assessed value is 10% of the appraised (or market) value. So, for example, a home with an appraised value of $100,000 would have an assessed value of $10,000. We have taken the median home value as an assessed value without any exemptions.

Median Home Value: $143,072
State Income Tax Rate: 2% – 5%
Avg. Effective property tax rate: 0.42%
Annual Property Taxes: $600

2. Nevada

Nevada's average effective property tax rate is just 0.69%, which is well below the national average of 1.08%. There are numerous tax districts within every Nevada county. County Assessors are required to reappraise all property at least once every five years. The assessed value is equal to 35% of that taxable value. Thus, if your County Assessor determines your home’s taxable value is $100,000, your assessed value will be $35,000. Tax rates apply to that amount. We have taken the median home value as a taxable value without any exemptions.

Median Home Value: $309,730 (Zillow)
State Income Tax Rate: 0%
Avg. Effective Property Tax Rate: 0.69%
Annual Property Taxes: $2,137

3. Florida

The state of Florida's average effective property tax rate is 0.98%, which is slightly lower than the U.S. average of 1.08%. Property tax rates are applied to the assessed value, not the appraised value. The most widely claimed exemption is the homestead exemption. Let’s say you have a home with an assessed value of $100,000. The first $25,000 would be exempted from all property taxes.

The next $25,000 (the assessed value between $25,000 and $50,000) is subject to taxes. Then, the next $25,000 (the assessed value between $50,000 and $75,000) is exempt from all taxes except school district taxes. Finally, the remaining $25,000 is also taxable. We have taken the median home value as an assessed value without any exemptions.

Median Home Value:  $252,309
State Income Tax Rate: 0%
Avg. Effective Property Tax Rate: 0.98%
Annual Property Taxes: $2,472

4. Louisiana

Louisiana has the third-lowest effective property tax rate of any U.S. state. Only Alabama and Hawaii residents pay less on average than residents of Louisiana. For residential property in Louisiana, the assessed value is equal to 10% of the market value. So if your home has a market value of $100,000, your assessed value would be $10,000. It offers a homestead exemption on the first $7,500 of the value of a person’s primary residence (does not apply to city taxes). We have taken the median home value as an assessed value without any exceptions.

Median Home Value: $170,388 (Assessed Value)
State Income Tax Rate: 2% – 6%
Avg. Effective property tax rate: 0.52%
Annual Property Taxes: $886

5. Texas

The average effective property tax rate in Texas is 1.83%, well above the national average of 1.08%. A property appraisal is done annually by county appraisal districts. Tax payments are based on the current market value of a property. However, some exemptions help lower property taxes in Texas. Most popular are homestead exemptions which reduce property taxes for all homeowners by removing part of their home's value from taxation. Only a homeowner's principal residence qualifies for it. It exempts at least $25,000 (for school districts) of a property’s value from taxation. We have taken the median home value as the current market value with Homestead Exemptions of $25,000.

Median Home Value: $211,199
State Income Tax Rate: 0%
Avg. Effective Property Tax Rate: 1.83%
Homestead Exemptions: $25,000
Annual Property Taxes: $3,407

You can also click on this link to read our blog on how to be a successful real estate investor. This blog will teach you how to succeed in your first real estate investment, going with a moderate pace, learning much, and being ready to leave any enticing opportunity that comes your way. 

REFERENCES

Median home values
https://www.zillow.com

Effective tax rates
https://smartasset.com

Tax advantages
https://www.investopedia.com/articles/investing/060815/how-rental-property-depreciation-works.asp
https://www.fool.com/millionacres/taxes/real-estate-tax-deductions/top-5-tax-advantages-real-estate-investing
https://www.usatoday.com/story/money/personalfinance/2017/04/16/comparing-average-property-taxes-all-50-states-and-dc/100314754

How to take advantage or maximize tax benefits
https://www.moneycrashers.com/lower-taxes-real-estate-investor
https://www.homeunion.com/how-to-claim-real-estate-taxes-and-deductions
https://smallbusiness.chron.com/calculate-value-investment-property-4122.html
https://finance.zacks.com/much-spend-investment-property-vs-potential-rental-income-10487.html

13 Tips For Buying a Rental Property in 2022

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Looking to purchase and profit from a rental property? In this article, we're going to give you some important tips on how to buy a rental property. These are the steps every budding property investor should take to pick a good cash-generating rental property. By following these steps, you’ll be well prepared to buy your first rental property. As a form of real estate investment, buying a rental property is considered to be a very good one.

You should buy a rental property if you want to diversify your holdings beyond stocks and bonds. The biggest advantage of buying a rental property is that it's a passive investment that required very little day-to-day management from owners or landlords. The other advantage is that you start earning a return on your capital investment immediately in the form of rent. Imagine this – After you make the down payment and pay all closing costs, the renter pays off your mortgage. How good is that?

However, it requires due diligence, on your part, to ensure you get the best return on your investment. Just like any business, purchasing a rental property to earn monthly income can be a bit risky too. Remember, choosing the right property, maintaining it, dealing with tenants—all that takes work. Investing in a rental property is not as easy as investing in stocks. From the first decision to get into the landlord's biz to buying a building, the idea may be daunting for the first-time investor. Real estate is a tough business so you need careful planning before putting down your money in rental properties.

Finding good rental property deals can be a difficult task to accomplish. A bad rental property deal will make you no profit or even worse, it can lead to a financial loss. Therefore, as a naive real estate investor, you should opt for buying off-market rental properties from turnkey real estate companies. A rental property should be turnkey and rent-ready. A good rental property is fully refurbished or a new construction residential property. The property must be in growth markets and must produce a positive cash flow. The property must have a good appreciation potential.

Norada Real Estate Investments helps take the guesswork out of real estate investing. By researching top real estate growth markets and structuring complete turnkey real estate investments, they help you succeed by minimizing risk and maximizing profitability. Our investment properties for sale are at or below fair market value – which means there is a potential for more returns on your investment.

For beginners looking to invest in a rental property, it is frequently placed in the category of income sans work. However, it’s not like that at all. Although it qualifies as passive income, that doesn’t mean you’re not going to buckle down. If you choose to manage the property yourself, you must know that unlike stocks it is not hands-off management. You will be required to do a lot of work for managing the rental property as well as your tenants.

Making money in real estate is not necessarily as easy or as simple as you’ve been told. Even if you hire property managers to help you manage your rental properties, you still have to manage them. Buying rental property is not for everyone. It should be an investment option you consider only once you’ve achieved a certain level of financial independence. If you do it right, you can put yourself on the road to success with cash regularly flowing into your bank account.

13 Tips On How To Buy Your First Rental Property

tips for buying a rental property

When seeking to buy a rental property, you must tread cautiously. This will help you to avoid common risks in rental property investing. Investment real estate, although a highly profitable business, is also equally a very tricky one. There’s a lot to be wary of including con agents and dealers, substandard properties, and exorbitant charges among others. It’s just important that you exercise caution before buying anything. Here are the 13 tips that you must follow when buying a rental property for passive income generation.

1. Buy Rental Property In The Best Location

As you already know, “Location, Location, Location” still rules and remains the most important factor for profitability in any form of real estate investment whether it is “fix and flip” or rental property investing. Before you get your heart set on a specific location, bring your rental property’s location into serious consideration.

  • Find out what is the crime rate in that location.
  • Are there schools close by and how are they rated?
  • How far are the amenities like parks, supermarkets, transport hubs, and restaurants?
  • How good is the rental property market in that location? What are the comparable rents and purchase prices?
  • How is the economic development of the area?
  • How the locality is expected to evolve over the investment period? If the area develops, the rent price will increase and so will your income and vice-versa.

2. Choose The Right Rental Property Markets

When choosing a rental market, it is always best to select one that is best aligned with your investing goals. For example, an investor who only wishes to go in it for the cash flow (and not appreciation) should probably opt for a more stable market. These markets won't fluctuate upwards or downwards, and they won’t be growing at a very rapid pace. The strength of the overall economy significantly impacts the real estate market. With the population, jobs, economy and industries, and mortgage availability moving upwards, the growing markets are always booming.

In growing markets the number of properties available to the population will be less, hence the demand for housing will increase. The increased demand leads to a rise in home prices. Strong real estate markets and increased job growth go hand in hand.  Demand for all types of real estate increases with the number of local jobs, as during periods of economic development or boom. Additions to the local labor force tend to drive rents and prices upon rental properties in the vicinity. So, you get both a good property appreciation and a rent increase.

Population growth is also an indicator of a strong real estate market. When people from out of state move in, the rental property market gets boosted. Such increases in the population of renters and employment trigger a rise in the demand for housing. The market entered into a phase that favors sellers and it takes many years for supply and demand to become balanced again. Now as a rental property owner it means that you have an opportunity to capitalize on a unique investment opportunity.

Our picks are affordable and growing markets like Houston, Dallas, Oklahoma City, Memphis, Dallas, etc. However, it’s difficult to tell whether a given market is wise to invest in, and there is certainly no guarantee that anyone can give you. Timing a rental property market is also important. When it comes to buying rental properties, location is important but so is timing to a certain extent. The general rule is – Buy in a Buyer's Market. Sell in a Seller's Market. You should not buy near the top of the housing market cycle and see the value of your property fall and then wait several years for the market to rise again.

3. Buy Rental Property Using Leverage

tips for buying a rental property
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As important as location, location, location is to buying, so is leverage, leverage, leverage. *David Reiss, a Professor of Law at Brooklyn Law School believes understanding the mortgage market helps keep costs low and reduces market cash flow uncertainty. Having a mortgage can also free up cash for repairs if needed for your potential investment. He goes on to say consulting a professional can save you time and money. Caveat Emptor. When going for leverage to finance rental properties, no lender will lend you money with no money down, and no seller will carry a note without you putting some money down even if it’s a promise to do money in the future.

There is no such thing as no money down in any type of real estate investment because the money is going to come from somewhere. In regards to buying investment properties with no money down, one of the best options you can try out is that of borrowing. There is a good deal of banks, financial firms, and private lenders out there who can readily loan you the amount you need to buy a rental property.

Importance of Leverage – If you do it right, you will be able to add more and more rental properties to your investment portfolio. If you wanted to buy $100,000 worth of stocks, you need to invest $100,000 out of your savings. But, if you want to buy a rental property that costs $100,000, you can use other people’s money to make this purchase. A bank or other lender will generally give you 80% of the purchase price. You just need to make a down payment of the remaining 20%. In this way, you can save 80% of your savings through leverage.

4. Choose a Single-Family House When Buying a Rental Property

Single Family Rental Property
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New real estate investors should start with single-family rental homes. Why? Upkeep is easier as you only deal with a single tenant. Should something break and needs repair you only have to fix the problem once. Wear and tear on your investment are also reduced with single-family tenants. Following the housing market decline in 2007, single-family real estate investing became a favorable option for investors, saving on construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate.

Single-family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single-family rental units. The overall supply of single-family rental homes is flat, though demand isn’t. That is why rental rates were steadily increasing in 2019. Affordable rentals or those renting for 75 percent of the median rate saw rents go up 4 percent in 2019. That is due to the low supply of single-family rental homes in that price range. Given the growing price of land and materials, developers choose to build more luxury homes and condos than cheap affordable homes.

The higher-end single-family rental homes renting for 125 percent of the median rate only appreciated 3 percent in 2019. The growing returns for single-family rental investment have led investors to flood in, snapping up foreclosures and properties in need of major repairs. While fix and flip are popular on TV, fix, and rent out is a standard way to acquire discounted single-family rental investment properties. It has also forced real estate investors to compete with other investors for fixer-uppers.

5. Screen Tenants For Your Rental Property

Do a background check of your tenants before signing up for a lease agreement. Check their court records, credit rating, historical landlord-tenant disputes, etc. Doing so ensures you have a qualified tenant for your rental property. Failure to do so can cause a multitude of expensive problems and personal stress to name just a few. Landlords need to thoroughly vet their tenants to be on the safe side. Finding and screening tenants, doing paperwork, and ensuring low vacancy rates is not an easy job. This leads to losses especially if such rental property was your sole investment. The losses add up more if you have bought the rental property through a mortgage.

6. Learn About Short Term Rental Restrictions

Welcome to the world of VRBO and Airbnb. These short-term rental companies can turn buying a rental property into a nightmare. Some cities have legislated short-term restrictions on rentals. Roh Habibi, the Founder & Principal of TheHabibi Group suggests potential investors need to be aware of HOA and condo laws that may apply to your purchase. Before buying, you need to be sure it can be used as a short-term rental.

7. Do the Math For Your Rental Property

Why overcomplicate your life? Ask yourself this, will the rental payment cover your monthly mortgage cost? Maybe even make you a few hundred dollars. Experts believe that inexperienced investors should let the numbers speak for themselves. If you meet your mortgage payments, you probably have a good deal. Overanalyzing when buying a rental property is a complication you don’t need. The cost of borrowing money might be relatively cheap as of 2022, but the interest rate on your rental property will be higher than traditional mortgage interest rates.

The 2% rule says that for a rental property investment to be “good”, the monthly rent should be equal to or higher than 2% of the purchase price. For a $100,000 property, the monthly rent collected needs to be $2,000/month or higher to meet this guideline. You need a low mortgage payment that won't eat into your monthly profits too significantly. If you live in a city like San Francisco or Los Angeles or Seattle, rent will likely be your biggest monthly expense.

It may eat up a good chunk of your paycheck. Follow the 50% rule for operating expenses on your rental property. If the rent you charge is $2,000 per month, expect to pay $1,000 in total expenses. Operating expenses on your new property will be between 35% and 80% of your gross operating income. The normal operating expense ratio range is typically between 60% to 80%, and the lower it is, the better.

8. Buy Rental Property With A Good Rate of Return

profitable rental property
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Owning rental properties can provide investors with steady rental income or capital gains when sold for a lump sum profit. Profit is made on investment as a percentage of the cost of the investment. A cap rate of 7% or north of that number is considered very good for a profitable rental property. Generally, the average rate of return on investment is anything above 15%. When calculating the rate of return on a rental property using the cap rate calculation, many real estate experts also agree that a good ROI is usually around 10%, and a great one is 12% or more.

Amazing deals can be found by wise investors. To do so involves shopping the areas for what houses are selling for. Areas that are expected to transition to a more gentrified neighborhood should be prime investment targets. The biggest disadvantage of buying a rental property that you could face is the lower yield. While not always the case, most rental properties are priced much higher than the fair market value in that neighborhood, and that is because of the convenience they offer since they are already renovated and come with a tenant in place.

9. Consult Real Estate Finance Professionals

When buying a rental property, it’s important to deal with recognized professionals. Opportunity cost and leverage are needed to be known, in the financing world. These experts will help you understand the cost benefits and potential opportunity costs when using all cash. They will advise you on the actual revolving cost and true margins on the financial side of things.

10. Get A Written Lease Agreement For Your Rental Property

lease agreement for rental property
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When renting your new property, having a proper lease is very important. With one in place, you can eliminate potential misunderstandings between you and the tenant. Some of these include rental payment and due date, termination fees, are pets allowed, insurance, ensuring the living space is clean, and even the heating temperature setting in winter.

When you have a written lease agreement, if there is a dispute at a later date, it can help clarify what was agreed to by both sides. On the other hand, if there is no lease agreement, then there is no authority for the landlord to make any deductions from the tenancy deposit – no matter how dreadful the condition of the property when the tenant moves out.

If he tries to make any deductions, any challenge made by the tenant will succeed at adjudication. Fortunately, when you have a lease agreement in place, there are several steps you can take as a landlord to mitigate any further damage and even cover the expenses to repair them.

11. Outdoor Space is a Bonus

outdoor space in a rental property
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And an appealing outdoor space helps a rental property attract and retain tenants. To rent to good tenants, consider buying a rental property with outdoor space. Most renters will enjoy having family and friends over for backyard BBQs, relaxing, and just spending time outdoors. If the area is private that’s a big plus to consider. Renters can then add personal touches to make the space an outdoor oasis to enjoy.

Outdoor space is desirable to prospective tenants, even if it is a patio, balcony, or fenced backyard. A usable outdoor space can be used for the kids to play or for pets to run free. If you can provide a small space to enjoy the sunshine and some fresh air, you'll be able to attract more tenants and select the very best. Having an outdoor space is always a bonus when it comes to renting.

12. Balance Your Risk

People will still need places to live even in a flat economic cycle. Your rental can be a steady income generator during a downturn. Choosing the correct rental property helps balance risk. Areas with a high demand for rentals will continue to generate income even when the economy is in a downturn.

13. Buy What You’re Familiar With

Like all your major investments in life, buy what you know. When buying a rental property, use your life experience to help you gain a competitive edge. Experts suggest looking for investment properties near your college campus. Another life experience to mine would be retired military near a military base. Properties near hospitals can provide rental opportunities for nurses. Your real-life experiences can make you a good investor.

Let Us Help You In Buying Your First Rental Property

The American Dream used to include real estate investing. If chosen carefully, real estate investing is likely to give steady returns in the long run. Buying a rental property, like most things in life, once you know the rules of the road it’s not as difficult as you first imagine. Fortunately, experienced real estate professionals or advisers are either a referral away or after some sleuthing on your own, added to your preferred supplier list. Go for reputed turnkey real estate companies and buy rent-ready properties.

A turnkey rental property is a great option for investors searching for passive income that requires as little active management as possible while still accomplishing a modest return on investment. Then, hire a good property management company that would find qualified tenants as well as manage the property on your behalf. When shopping for expertise remember, there are no stupid questions. But lots of stupid answers.

Consult with one of the investment counselors who can help build you a custom portfolio of turnkey cash-flow rental properties in the various growth markets across the United States.  All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching top real estate growth markets and structuring complete turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

References For Further Reading:

  • http://www.fitsmallbusiness.com/buying-your-first-rental-property-tips
  • http://www.sdfcapitalllc.com
  • http://www.thehabibigroup.com
  • http://www.losangelesemploymentattorney.org
  • http://www.caponeforyourhome.com
  • http://www.freddybaezcalderon.com
  • http://www.roomtobreathe.us
  • http://www.homeunion.com
  • http://www.aehomegroup.com

Top 10 Features of a Profitable Rental Property in 2022

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If you're considering a long-term investment in real estate, rental property can be a great option for you. We will be discussing the best features of a profitable rental property which can assure great returns with stability. Rental property investment (or simply buy-to-let investment) is a very viable form of investment. As an investment avenue, it more often than not guarantees you a steady return on your investment. This, alongside forming a fairly strong protective hedge around your financial future.

Rental property investment continues to grow in the US. This growth is attributed to rapid urbanization and changes in per capita income alongside other socio-economic factors such as the unaffordability of homeownership. Young Americans are delaying home purchases due to steep prices that remain out of reach for many, which is expanding the rental housing market.

Homeownership is in decline after a few years of modest gains. The decline is seen among all age groups, with people under 35 seeing the largest decline. Therefore, rental demand is expected to increase significantly over the next five years, with many high-population locations currently facing rental housing shortages. As of now, 40.7 million or 34.6% of occupied housing units are renter-occupied. This suggests that demand for rental housing is on the rise, and that supply is failing to keep up with it.

In 2021, the nationwide homeownership rate declined 3.7% year-over-year (YoY) and the number of owner-occupied units declined 4.0% YoY. Homeowner vs. renter statistics reflects a decline in homeownership, with 36% of American households renting their home. 78.7 million out of a total of 122.8 million households are homeowning. 44.1 million households rent their homes. 2.7% of occupied housing units are second homes. 11% of all housing units are vacant. In the first financial quarter of 2021, the homeownership rate was 65.4%.

The Census Bureau counted nearly 20 million rental properties, with 48.2 million individual units, in its 2018 Rental Housing Finance Survey, the most recent one conducted. Individual investors owned nearly 14.3 million of those properties (71.6%), comprising almost 19.9 million units (41.2%). For-profit businesses of various sorts owned 3.7 million properties or 18.8%, but their holdings totaled 21.7 million units or 45% of the total. Entities such as housing cooperative organizations and nonprofits owned smaller shares of the total.

Individual investors are more likely to own single-family and duplex rental homes while big institutional investors own multi-family rental properties. The surveys show that 28% of renter-occupied homes are detached single-family units and 42% of renters live in single-family homes. The majority of the largest owners of apartments in the U.S. are real estate investment trusts (REITs), which are companies that own (and usually operate) income-producing real estate. In 2018, there were 226 REITs in the United States, who owned a combined 821 billion U.S. dollars of assets, and who had a combined market capitalization of one trillion U.S. dollars.

The rental returns in the U.S. have been steadily climbing in recent times. However, when seeking to invest in a rental property as a beginner, you must tread cautiously. This will help you to avoid common risks in rental property investing. Real estate although a profitable field is also equally a very tricky one. There's a lot to be wary of including con agents and dealers, substandard properties, and exorbitant charges among others. It's just important that you exercise caution before buying anything.

Talking about being careful, there's one mistake that every rental property investor must seek to avoid. What is this? Well, it's the mistake of buying an unprofitable rental property. Purchasing such a rental property is like taking all your hard-earned money and throwing it away. The property will just be sitting there with you barely earning anything from it. Worse still, it may even take from you in the form of repair and maintenance expenses.

Top 10 Features of a Profitable Rental Property in 2022

Features of a Profitable Rental Property

Investors seeking to invest in rental properties should always first ascertain a property's viability. There's only one way to know if a given property is indeed profitable, this is by checking if it meets the profitable rental property criteria. Below is a list of the top 10 features of a profitable rental property that you shouldn't ignore in 2022.

1. A Property Worth Your Money

features of a profitable rental property

Before anything else, a real estate investor should be convinced that the given rental property is financially worthwhile. Ask yourself whether the property in its current or improved state is worth spending your money on. How much rent is it likely to earn you per month?

What's the cost of repairs and refurbishment? Is it worth it? These are the kind of questions you should be asking yourself beforehand. An ideal rental property should earn you an annual gross rent of at least 12% of the purchase price. Apply the one percent rule to help you determine this.

The monthly rent you'll be collecting should at least be 1% of the house's value. This is one of the best features of a profitable rental property considered by seasoned real estate investors. Additionally, you can also involve a financial expert to help you determine the cap rate. This too will help you decide on whether the property is worth it.

2. A Neighborhood With Favorable Clients and Low Vacancy Rates

There isn't any other way, a rental property owner needs tenants. This is the only way he or she can earn income from the property they've invested in. The amount of income you make from a rental property is directly proportional to the neighborhood it's located in.

Neighborhoods with high rent rates will earn you more money than those with less. Likewise, neighborhoods with a higher caliber of clients will also earn you more. A perfect illustration of this is a case where there're two neighborhoods, one dominated by college students and the other with working-class family occupants.  It goes without much saying that the latter will earn you more profits.

Too many vacancies could also mean the area is unattractive due to crime or other factors. Investigating the area with a local real estate agent can give you insight into the safety of the neighborhood and the reasons for the abundance of rental properties. This is also one of the features of a profitable rental property that you should always keep in mind.

3. A Safe And Secure Neighborhood

top 10 features of a profitable rental property

Security is very key when it comes to rental property investing. No tenant can knowingly want to live in an insecure neighborhood where crime or burglary rates are high. This holding true, your rental property business is unlikely to thrive in an unsafe and crime-infested area.

One of the features of a profitable rental property is that it should be located in a very safe neighborhood. Burglaries and theft are the most reported crimes in the U.S., so renters want to know that their families and items are secure. Areas, where vandalism and crime rates are high, are areas to avoid when considering purchasing a rental property.

Therefore, choose a neighborhood with adequate security when purchasing a property. Check things like street lighting, patrol police presence, proximity to sheriff departments, and crime data reports among others.

4. Presence of Schools With High Ratings

profitable rental property
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The availability of highly-rated schools is another key indicator of a rental property's potential profitability. The presence of educational facilities greatly determines whether tenants choose to settle in one place or not. It's all parents' wish to give their children a high-quality education that can spur them forward in life.

Parents can therefore never wish to live in an area that lacks quality schools and educational hubs. There should be elementary, middle, and high schools of good standards in the neighborhood.

This is also one of the best features of a profitable rental property. You can check the school ratings from sites like Greatschools.org. Using their school quality information, you can check the ratings of all the schools in your community. As an investor, take care, therefore, to pick a location with the best schools and learning abilities.

5. Presence of Physical and Social Amenities

profitable rental property features

Rental property investment thrives in areas with adequate amenities. Tenants want to be able to always access the facilities and services they require. These include things like shopping malls, gyms, medical facilities, and restaurants. They also include services such as telephone, water, electricity, and internet. Tenants will readily occupy your house if they can conveniently access these amenities – another great feature of a profitable rental property.

6. Adequate Transport Facilities

profitable rental property features

Related to socio-economic amenities, adequate transport also plays a significant part in rental property investment. The rental real estate business can only do well in areas with adequate transport. It’s smart to figure out the time you’ll spend commuting from home to the places that are important to you. Do you have quick access (within a few blocks) to a transportation system?

Ask yourself these questions:

  • Does your would-be neighborhood have a good network of roads?
  • Are the roads tarmacked?
  • Do they have potholes or get flooded when it heavily rains?
  • Is there enough public transport?
  • Are there other means of transport aside from road – Airports, Buses, and Tubes?

These questions will help you choose a profitable rental property.

7. Adequate Sanitation

You can't talk of the features of a profitable rental property without also talking about sanitation. There's a need that the rental property you intend to buy to be in a place with adequate sanitation. Tenants tend to shy away from places with want hygiene and sanitation.

Picture this, no one would wish to live in a place where flies dash in and out at will or where drains lie open, or where there is a badly managed sewage system.

Try and pick a property with sufficient sanitation. Check on things like waste disposal, toilets, sanitary facilities, septic tanks, water and sewerage, stormwater drainage, etc. The cleaner the house and the neighborhood are, the higher the number of profits you can make from it.

8. Favorable Climate

Climate too plays an important part in the success of a profitable rental property investing business. Houses located in places with inclement weather usually struggle to attract clients. It's, therefore, necessary that you choose a location with the right climate for your property.

In line with picking the right climate, avoid cities that tend to have extreme and harsh weather. Also, avoid areas that are prone to floods and even fires.

9. Areas Devoid of Natural Disasters

profitable rental property feature

Another important feature of a profitable rental property is that it should not be located in an area prone to natural disasters. With natural disasters and calamities, you really can't say whether a place is immune to destruction or not. It's just a matter of hoping for the best. Anywhere, there are places that from past occurrences have been known to be highly prone to natural disasters.

These include disasters such as tornadoes, hurricanes, windstorms, wildfires, storms, and even earthquakes. Places such as these are not very suitable location choices for rental properties. In the event of such disasters, one loses all their investment. This can be quite unfortunate if you also didn't have insurance cover against such eventualities.

10. Favorable Property Taxes

Property taxes on property in a given city or state also determine the profitability of rental property investment. The higher the taxes and charges levied by the government in a given area, the less you'll earn from investing in that area. Try and choose an area with attractive state levies.

Depending on where you live, you may qualify for a property tax exemption offered by your state, county, or local jurisdiction. Several other states have property tax rates under 1%, many of which are located in the south region of the country.

As an example, Alabama has both a low tax rate (0.40%) and home prices that are well below the median home value in the U.S. You can find high-quality investment properties at reasonable market prices in the Birmingham real estate market.

How To Find A Profitable Rental Property For SALE

Investing in a rental property can be a hugely profitable venture or a financial mistake. It all depends on how you go about it. You will not make money in real estate unless you buy a profitable rental property in a growing real estate market. Try and take your time before putting your money on any property. Check carefully and be sure that it is worthwhile. Depending on your situation, you can go about the property purchase on your own or involve a real estate agent. Whatever the case, you should be able to reek in some profits from the right property.

Go for reputed turnkey real estate companies and buy rent-ready properties. Then, hire a good property management company that would find qualified tenants as well manage the property on your behalf. When shopping for expertise remember, there are no stupid questions. But lots of stupid answers. Consult with one of the investment counselors who can help build you a custom portfolio of turnkey cash-flow rental properties in the various growth markets across the United States.

Here are some of the growing real estate markets where you can invest in a rental property and get good returns:

All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching top real estate growth markets and structuring complete turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

  • We offer investors fully refurbished as well as new construction residential properties ranging from single-family homes up to fourplex multi-units.
  • Our properties make sense the day you buy them.
  • There is nothing that needs to happen for the property to be a good wealth-building investment.
  • We select markets based on several factors.
  • At a high level, we consider economic factors that include job growth, unemployment, population growth, as well as the condition of the local housing market such as inventory, home price trends, etc.
  • Some of our properties come with a rent guarantee ranging from three months to one year.

References:

  • http://www.nmhc.org/Content.aspx?id=4708
  • https://ipropertymanagement.com/research/renters-vs-homeowners-statistics
  • https://www.investopedia.com/articles/mortgages-real-estate/08/buy-rental-property.asp
  • https://www.baymgmtgroup.com/blog/the-top-10-features-of-a-good-rental-investment
  • https://wealthmasteryacademy.com/top-10-features-of-a-profitable-rental-property
  • https://money.usnews.com/investing/real-estate-investments/articles/2017-08-23/a-guide-for-investing-in-rental-property

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