Real Estate and Your Money Investments
In the times we live in the ability to possess comfortable living throughout your lifetime is becoming more and more challenging with the constant fluctuations of the U.S. dollar. Because of this many consumers as they age begin to seek ways to invest to help ensure they have adequate funds for living the length of a lifetime. Many select various retirement fund programs which is the most popular among middle income workers that have access to retirement plan options with their employer. While others that have incomes that permit invest in stocks, bonds, and various other money market options available to the general population to secure potential incomes for their retirement needs. In the last few decades however, an increase has been seen in the form of investment in land and property for the purpose of securing options for retirement income. The reason for this is believed to be because of the lower risks involved in property investment. Although not every financial investor agrees with this developing investment option for retirement, for many it is the most convenient and less risky route to go since an asset becomes a fixed possession they have when investing in property. As we all know the stock market and money exchanges in this country as with most other countries can fluctuate drastically from year to year. Unfortunately these fluctuations also affect property values as well. However, unlike stocks, bonds, and other market investment options, property investment provides a small difference that cannot always be guaranteed with cash investment endeavors. Since land is an immovable asset there is a guarantee that it will always exist once purchased since land cannot be moved or vanish. For this reason investing in land does create a way out for an investor who chooses to select this as a part of their retirement funding. Although much like any other investment real estate can increase and decrease in market value from year to year depending on the value of the economy and the U.S. dollar. However an owner of property can choose to continue to make consistent gains on the investment by renting the property on a monthly basis in the form of a lease to a tenant. While the return on investment may fluctuate depending on the demand for rental property the fact still remains that the asset remains in tact, a net profit can continue to be gotten from it, and at a time when the market value increases it can still be sold. Many individuals reason that even if the value of a property decreases from the original purchase price the rental income over a period of 8 to 12 years can stabilize the losses in value until the market is more favorable for a sale for the residual amount to get a full return on the investment property rarely with much of a loss. It is because of this concept that many are diversifying their investments with buying real estate. However, unlike purchasing a home for a personal residence there are a lot of differences that must be carefully evaluated before investing. For starters, down payments required for investment property is often a minimum 20% of the purchase price when lending is to be used for the purchase. Homestead exemption is usually not an option for tax breaks since the owner will not be occupying the space as a primary residence. Insurance coverage may be slightly higher due to the nature of the liabilities associated with tenants occupying the space. The location is of greater importance if the property is to be rented consistently from month to month. The cost of management and tenant screening along with other legal expenses such as eviction processes should this arise also need to be considered. Although these items seem to add to the cost of the investment there are quite a few taxation provision that will offset these added cost such as most maintenance and repairs can be deducted as expenses. If a mortgage is still in place in many states the mortgage amount, interest payments, and taxes on the property may be deducted from expenses of the rental property. The cost of management and legal fees often also can be deducted in the annual tax deduction allotments provided by the government authorities. Unlike most personal residences larger deductions may be allowed for property damage when caused by the tenant. Perhaps the largest mistake made by individuals when buying investment properties is the poor selection of properties for the intended purpose of rental use. For this reason it is a good idea to get a real estate professional involved to handle investment in property for rental use as each property must be carefully evaluated for median rental incomes, supply and demand comps should be evaluated, life of the potential rental income availability term needs to be calculated, and of course as with any property the market value must be considered in depth to ensure a good investment is made. Naturally the best investment purchases are those with the most ownership of equity in the property as this increases the net profit on a monthly basis when renting the unit. What this means is it is a good idea to be able to pay more than the 20% down amount required to obtain lending to give a little more wiggle room for maintenance and the occasional costs involved with maintaining a rental property, such as the cost of a real estate professional that can adequately screen tenants to ensure the best occupants for your property is found as well as legal contracts put in place to protect the interest of leasing your property. Many individuals that have some real estate or legal background can manage their property however very few of these individuals are required to continue their education on rental laws and requirements annually by law as real estate professionals are required. Because of this often times an owner managing their own property may run into legal issues with tenant laws and requirements set forth in each state for the protection of consumers. Hence, if you feel you cannot or do not have the time needed to manage your own properties by way of studying the annual law changes in regard to landlord and tenants in your state it is usually best to obtain a real estate professional to manage your properties at a monthly cost that is usually minimal in comparison to the expenses that come with rectifying legal breaches of state housing and leasing laws. So where do you start if you think property investment is something that would be advantageous to you? Unlike buying and selling your personal residence it is almost absolutely a necessity to hire an investment REALTOR to handle your property and the growth of more units to increase your retirement income investments. In case you hadn't thought about it.......realtor fees associated with investment and rental properties are also deductible tax filing items!