Understanding Timing in (florida investment property) Real Estate

October 29th, 2009 admin Posted in realestate |

By Luat Tran Van

Psychologists consider buying a home to be as stressful as divorce, serious illness, death and other life-changing events. But the more you know about buying a home, the less stressful the process becomes. Being aware of all options and potential pitfalls means youll be able to make the right series of informed decisions in the right order and you may even enjoy doing so.

Your rationalities for deciding to buy real estate sometimes include changing housing requirements, a desire to invest or to have a vacation residence, or just ready to stop throwing away rent money out the window. Whatever your reasons are, having a home can offer plenty of benefits. As a matter of fact, this transaction not only could improve your life quality, but it can be the most effective investment of your life.

Timing is everything in real estate. There are many things to consider before you buy a home. You will incur the responsibility of mortgage payments and caring for a home. Your money will be tied up in an investment that is not necessarily considered liquid. The pros outweigh the cons, and potential pitfalls can be avoided by working with the best professionals. But everything good and bad should be considered, as the timing of your purchase or the decision to buy could be affected.

First, think about all the reasons for making the purchase. Do you want to begin building wealth and stop wasting money in rent payments? Do you want a different lifestyle with a new housing arrangement? Do you want a vacation home? Are you looking for a way to diversify your investment portfolio with a safer, long-term investment? Do you need a tax write-off? All of these are good reasons for buying real estate.

Second, consider whether or not you are in a position to buy. If you are making an investment, is it a buyers market or sellers market? If your current investment portfolio is presently made up of only stocks, bonds and mutual funds, do you need to diversify? If your job requires you to move a great deal, do you plan to remain in the area for a sufficient amount of time to warrant a purchase?

Given closing costs and the amount of time needed for a property to appreciate in value, it may not make sense for you to buy now if you do not plan to live in the home for more than three years. If you want a larger home, can you afford it, based on your current income and savings? Or is your current income actually so high that you need a good tax deduction? Do you have credit problems that may prevent you from securing a loan? Will your future income and housing requirements be changing and will the home be affordable and functional then?

Its easier to answer these questions when you consider in more detail the implications and benefits of owning real estate. Now may be a good time to meet with your accountant or financial planner. The process of applying for a loan or becoming pre-qualified at a bank will also help you answer questions regarding the affordability of a home.

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Building Wealth with Rental Income

By Luat Tran Van

Rental income is another way to build wealth. Many investors build a portfolio of rental properties so large that they live off rent payments exclusively. The greater the positive cash flow from rent, the greater the income.

Renting while on vacation is like throwing money out the window, but many people still rent because they are not willing to make the commitment of additional home ownership or have not been able to save enough for the payments.

Owning a rental property or a vacation home that can be rented out to short-term tenants during the off season may be a solution. Instead of renting while on a vacation, many people are opting to own a vacation or second home due to the tax advantages and investment potential of owning real estate. Wealthy people do not own second homes only because they can afford to do so; they also own second homes for tax write-offs or for long-term investments. Many wealthy individuals intentionally maintain mortgages strictly for the tax deduction, even though financing the deal is unnecessary.

Mortgage interest and property taxes are also tax-deductible on a second home. Vacation homes, especially those on the water or on a golf course, will most likely appreciate in value. In Florida, vacation homes are an extremely popular way for many to invest and maintain a get-away shelter. Businesses that own vacation homes for the enjoyment of their associates and clients deduct costs as a business expense.

Some buy residences strictly to rent to long- or short-term tenants. Rental payments help pay off the mortgage while the property appreciates in value, thus building equity. At the same time, landlords may enjoy a positive rental income. Rental properties also qualify for depreciation allowances as a tax benefit.

If you want the benefits of both a second home and a rental property, you can buy a multi-unit apartment and live rent-free in one of the units while the tenants pay the mortgage. In this way, one can act as an on-site owner landlord. Some individuals rent out to tenants for part of the year while remaining up north, then fly south to live in the residence for the other part of the year.

An arrangement offering similar benefits is a time-share, where several individuals retain part-ownership interest in one residence and take turns actually residing in the home. This reduces an individuals risk, commitment and investment, while offering use of a great part-time vacation home.

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