Remembering The 4 Benefits of Real Estate Investing

These last couple of years have been tough.  What with real estate investment financing the way it is and all.  Seems the majority of the investors that are still moving in the market, with me at least, are looking more at cash flow than long term growth.  Cash flow is good.  Cash flow may be king.  But it’s certainly not the only benefit of owning and operating rental property in the Kansas City area.

There are 4 benefits when owning investment property.

  1. Cash Flow Before Taxes
  2. Principal Reduction
  3. Tax Benefits/Savings
  4. Appreciation

Appreciation?  What?  Am I kidding you?

Listen, the topic of appreciation is a whole other post.  A rather lengthy one at that.  But remember in the late ’90s when people spoke of the “new economy” and how it would never crash?  Well, this too shall pass.  And when the depreciation and the flat growth turns around (1 year?  10 years?  100?) we will once again have appreciation.

Last week we discussed what NOI (Net Operating Income) was and how it influenced many things about your investment property.  Over the coming days we’ll discuss the 4 Benefits in more detail.  But it’s not like there isn’t plenty to read already.  This is my 33rd post regarding the 4 Benefits of real estate investing.  You can just go to the Categories section of this blog to look up the other 32 postings I’ve done over the years.   Or you can just click here:  The 4 Benefits of Real Estate Investing.

2 Comments

Filed under 4 Benefits of Real Estate Investing

2 responses to “Remembering The 4 Benefits of Real Estate Investing

  1. Pat

    Looking at appreciation and tax benefits, is it time to sell income properties, pay the taxes on your gains, and than buy another property.

    Capital gains taxes may move from 15% to 20-25% next year.

    Will this future tax increase cause a short term drop in investment property prices at the end of the year?

    Will you be prepared for this opportunity to buy from sellers who need to lock in capital gains. A seller may be willing to sell at a discount to move the property if taxes next year will eat up 10% of their appreciation.

  2. Good Stuff…My team is finding the same thing with our investors!!!

    CASH FLOW IS KING!!!

    But Sellers being backed into a tough spot is rough on all of us…the economy, the entire market.

    So everyone is looking for alternatives…but you always have to ask a few questions regarding any “alternatives”…

    Does the alternative…
    1. Avoid violating the lender’s due on sale clause as per the Garn-St Germaine Act?
    2. Protect the subject real estate against any unrelated co-beneficiary parties legal problems?
    3. Allow for simple eviction, versus a foreclosure process and the necessity of an ejectment and quiet title action, should a defaulting tenant-buyer make a claim of holding “equity” in order to avoid eviction while forcing force a time, expense and income-delaying judicial foreclosure process?
    4. Avoid the necessity for payment of capital gains taxes until the termination of the agreement?
    5. Allow for the transfer of income tax benefits to a resident beneficiary w/o a title transfer or a transfer of equitable interest in the property?
    6. Allow for continuous leasehold and occupancy beyond three years w/o a resultant due on sale violation?

    There are about 10 of these questions I consult my clients on before entering into a Lease Option or Rent To Own contract. Both the buyer and the seller need to take precautions that protect each other, but the investor has to be protected while waiting for normal appreciation outside of these current economic conditions.

    Again great article!!!

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