Why you should buy a rental property before year end
Neil Shekhter – NMS - Why you should buy a rental property before year end and how to do it right
As an entrepreneur or a small business owner, you may have earned your money from different sources. Now you may be looking to invest it into a stable income source, which is sure to grow and provide you capital gains in the long term.
A rental real estate is one of the best investments you can make in this regard.
Although the time and skills required to manage the tenants and property can be a disadvantage, the advantages of having a rental property far out weights the disadvantages, according to Neil Shekhter.
Here are a few reasons to consider:
1. Leveraging Money
OPM or Other People's Money is a famous concept in the financial space. Rental property is a great asset and you can use money from the bank to buy the property then rent it out.
The cash flow from tenants will enable you to pay off the mortgage and also make some profits.
In the long term, you can sell the property for appreciation gains and make a cash windfall.
2. Tax-Free Cash Flow
Cash flow from real estate investments is often tax-free due to depreciation and mortgage interest deductions. Besides, there are guaranteed capital gains in the long-term
3. Tax Deductions Against Other Income
Before doing anything tax related, please consult your income tax professional.
With that said, by having a rental property you can show your personal expenses as business expenses and deduct that from the taxable income.
4. A Commitment to Saving and Retirement Income
With other forms of savings like IRA, SEP or 401k, we lack the consistency to put a monthly deposit. With a rental real estate, you are forced to maintain the property and commit to it for the long-term. It is well worth in the long term since you are building real wealth with a valuable asset. Finding the right rental property can be a bit challenging depending on your circumstance.
Here are six strategies you can use to find the best rental real estate:
1. Give Priority to Buying Local
Buying local means you have a good idea about the market and the return on your investment.
That said, it is not set in stone that you need to buy local. You should always look for buying a quality rental property over buying it locally.
2. Work On Your Rental Business by Having a Property Manager
Your focus must always be on "building" your assets rather than "managing it". This includes looking for more rental properties to add to your portfolio, doing books and also working on your primary income source. By having a property manager you will be freed from building the skills and systems required to manage the rental properties. So make sure to set aside a budget for a property manager in your rental property analysis.
3. Put all Your Eggs In One or Two Baskets While Starting Out
It is better to have your rental properties in one or two close locations while you are starting out. That way you will get to know the areas and property managers better. Also, you can be efficient with your tax and legal planning.
Managing rental properties in one or two locations can be stress-free and efficient while you are starting out. Later, when your rental business is able to provide you full-time income, you can have many properties in different locations.
4. Make Buying Decisions Based on Spreadsheet Data
You will be able to make a much better buying decision by having a rental property analysis spreadsheet.
Check the property based on these spreadsheet columns:
fair market value, money down, improvements, mortgage cost, rental income, and expenses, finish off with cash-on-cash return on investment.
Base your decision on this spreadsheet data to ensure that your decision is logical rather than emotional.
5. Logic Over Emotion
Remember you are buying the rental property as an investment, something which will provide you massive capital gains in the future and possibly a retirement income.
It is better to invest each dollar by thinking how much return you can see in your future instead of seeing the rental property as your future home.
6. Research and Research More
Before buying any rental property make sure to do proper research. Use the rental analysis spreadsheet, think how much each dollar you put in gives you back. Consider all the reasons why you should invest in a particular property, always remember logic over emotion, Explains Neil Shekhter, chief executive officer of NMS Properties
Per Neil Shekhter, always be bit skeptical and let the numbers and data prove that you are making a good buying decision.
With these strategies and approaches, you can be certain to make good rental property investments. This is a long-term approach, but it is worth in the end as you will be building true wealth.
NMS has offered quality rentals in the Los Angeles area for nearly three decades. Since 1988, NMS has developed and managed a large portfolio of premier apartment buildings and commercial properties in Santa Monica, West Los Angeles, Brentwood and the San Fernando Valley
SOURCE: NMS Properties, Inc.