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There are numerous ways to invest in real Estate, the one to start out with is the purchase of your own
home. Strictly speaking this is not an investment nonetheless it will likely turn out to be the best investment
you ever made!
Once you own your own home (along with the bank) another possibility is the flip. Here you purchase
a property below market value and sell it at a profit. Often with a little or a lot of fixup work in the middle.
There are a few difficulties with this. (1) Why would somebody sell their home below market value? Not
many people would but every now and again it happens so you need to keep an eye out for it. (2) If you
are not skilled at fixup work then you must pay somebody else to do it and that makes it a lot harder to
turn a profit. (3) FHA came out with some no-flip rules that prevent you from selling to a buyer on an
FHA loan (some conventional lenders are starting to adopt similar rules).
Another way to go is to purchase properties to use as rentals, again the element of fixup may be
involved. Here the difficulty is to create a positive cash flow so that the property is not a drain on your
resources. This can be accomplished either by making a substantial downpayment or by purchasing a property
in need of fixup work and doing it yourself. Rentals work financially because the IRS allows an annual
depreciation deduction which further enhances the cash flow. Expect operating expenses to be on the
high side because renters typically do not take good care of a home and sometimes need to be evicted at
considerable expense.The hope is to eventually sell the property at a considerable profit due to rising real
estate prices.
Some people like to invest in land. Here the timeframe plays a role in where to buy. If you have a long
timeframe (many years) then it might make sense to purchase land on the edge of town in the direction
along which development is occuring. The idea being that the parcel would not only increase in value
due to inflation but also because of its eventual close proximity to new developments. With a shorter
timeframe it may be better to purchase land that is closer to current developments so that it can participate
in value increases due to proximity to development in a shorter time.
Click here for information on investor loans. Another possible source of funds
is an IRA, regulations do permit IRA money to be used for the purchase of investment real estate.
Download NAR Report: Understanding Capital Gains in Real Estate
If you already own investment real estate and you are sitting on a sizeable amount of equity then you should
consider trading up to a higher value property and increase your leverage. Did you know you can do that
without paying capital gains taxes, read on...
One important tool in the investors arsenal is the 1031 Exchange. This allows an
investor to sell one property and purchase another (trade up) and defer paying capital gains taxes
on the profit until the new property is sold. (The taxes can be avoided again and again by using the 1031
exchange mechanism on the sale of the second and subsequent properties). The rules pertaining to a 1031
exchange are complex and must be followed exactly for the exchange to be valid, the use of a specialist to
handle your exchange is essential.
TIC (Tenants in Common) investments make it possible for investors to put their money into large
commercial properties at a price that would otherwise be beyond their financial ability. Here the investor holds
title as a tenant in common along with other investors. Each investor holds an undivided interest in the
property and participates in the rental income and appreciation in proportion to their ownership interest. TIC
investments offer the same tax saving benefits as sole ownership. The advantage of holding title as tenants in
common rather than as a partnership is that it makes the investment eligible for a 1031 exchange.
Typically the property has multiple tenants, each on a triple net (NNN) lease. The day to day running of
the property is handled by a professional manager which the co-owners have the right to approve. Frequently
non recourse assumable financing is available with no assumption fees. This program features no
closing costs and closings can be in as little as two weeks. TIC properties are the ideal 1031 replacement
property. Ownership in high quality institutional grade property through TIC starts as low as $150,000.
If you are interested to proceed further and you would like to be contacted by a TIC investment specialist
please fill out the following form:
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