Categories
Real Estate

Smart Real Estate Investments

These days, there are many ways in the property market to create smart real estate investments. In addition, when it comes to real estate investment, there are three types of income that you should understand: Earned Income, Passive Income and Portfolio Income. This model of income has been taught by Robert Kiyosaki, real estate investor. He discusses these concepts in his book, Rich Dad, Poor Dad.”

In this article we not only discuss smart real estate investments, but also how to generate money from many different types of real estate investment. This includes the BRRRR method for rentals and Real Estate Investment Trusts. We also make some predictions for the future.

Earned Income

If you work at an 8-5 job, working Monday through Friday, you receive earned income. You might be a manager, a cashier or a trucker. For example, you may be paid hourly or by salary. As a result, if you don’t work, then you don’t typically get paid. Essentially, you are trading your time for money.

There are 24 hours in a day and 168 hours in any given week. Most people work a 40-hour work week shift. However, even if you worked every hour of each day, there is a limit to how much money you can earn. Even if you wanted to work 30 hours a day (which is impossible), you cannot violate the laws of universe.Cash Flow Real EstateIn addition, there are limits on taxation with earned income. The IRS has established tax rates for all earned income, based on your earning bracket. For example, a single person who makes $40,125 – $85,525 is taxed at a rate of 22%. Money is automatically taken from your salary each month. The tax money is then sent directly to the IRS. Although there are things you can do to reduce your tax bill, there’s not much wiggle room on how much the IRS takes.

Creating Smart Real Estate Investments with Passive Income

Passive income is one of the best ways to initiate and create smart real estate investments (and create a cash flow). As a result, it is simply earning money with little or no effort. Moreover, with passive income, you earn money while you sleep or vacation. Although this idea may sound impossible, it is a secret that millionaires and billionaires have utilized for hundreds of years to become wealthy through cash flow real estate.

Common examples of passive income include owning commercial property investment rental properties. Of course, there are other examples of passive income, like stock dividends, high-yield savings accounts, annuities, and real estate investment trusts (REITs) as well.

Unfortunately, although passive income may seem like easy money, it’s not. Generating passive income requires upfront work that lays the groundwork for future income. It is not a get-rich-quick scheme. In addition, it may require some additional work as you move forward. For example, if you own a commercial rent property, you will be required to pay for property maintenance, improvements, taxes and insurance on your investment.

Methods to Make Money Investing in Real Estate

Rental Income, Appreciation, Tax Deductions, Creative Services

Rental Income

The most common way to make money via smart real estate investments is to generate rental income. Rental income is a type of passive income that is generated from charging tenants of a property rent each month.

Examples of rental income sourced through smart real estate investments include medical facilities, warehouses, business offices, strip shopping centers and the like. Ideally, successful commercial property investment involves selecting an area where growth is occurring or that is densely populated. The investor purchases commercial property in these areas and then leases space to tenants, generating passive rental income.

In addition, when searching for any real estate property you want to maximize the quality of your investment. Purchasing properties that require minimal improvements or renovations is best. Moreover, the property purchased should be at or below market value. Obviously, you don’t want to buy a property in the middle of a real estate bubble, which could be worth less the following year. In addition, purchasing at the right price will maximize the cash flow from the smart real estate investments you make.

Appreciation

Next to generating rental income, appreciation of property values is the second most well-known way to generate income and cash flow real estate. Property appreciation occurs when market prices increase overall or when improvements are made to a property.

Recently, the United States has seen significant increase in market prices across the board for real estate. In fact, many experts believe that the real estate market has been in a bubble and prices are at an all-time high.

However, even if the market didn’t lift the value of your commercial property, it may have increased simply as a result of capital improvements. For example, if you own an apartment complex, perhaps you added covered parking to the complex or installed a swimming pool. Both of these would be considered improvements, which would theoretically increase the value of the property. Appreciation, or an increase in the value of the property would only be realized upon sale of the property.

Creative Services

There is a great way to generate income from your commercial properties that many people don’t even consider. There may be opportunities at your properties for add-ons or additional services that you haven’t considered. For example, installing vending machines or charging for covered parking. The only limit to providing these services is your own creativity.

Many of these services require little or no expense, effort or improvement to the property. For example, having a third-party vendor install a vending machine can cost nothing. Yet, you can earn a percentage of sales from the vending machines by contracting with the vending company.

Tax Deductions and Depreciation

There are many tax deductions for commercial real estate property owners. In many cases, when properties are treated as a “pass-through,” a tax deduction can be taken. Moreover, the tax savings can mean thousands of extra dollars in your pocket.

There are also depreciation options for certain landlords to take advantage of. These allow property owners to deduct the costs of personal property, such as onsite equipment, appliances, etc., from their taxable income. Follow up with your tax professional for more information regarding tax deductions.

Alternative Methods for Property Investment

Long Term Investment Income (Portfolio Income)

Portfolio Income from long term investments is earned is made by capital gains. Assets can be examples of portfolio income. For example, if you own stocks, bonds, property, etc., you have portfolio income. When you sell your assets, hopefully they have increased in value while you held them. As a result, during the sale you incur capital gains.

For example, let’s say you bought $1,000 worth of stock in 2018. Now, in 2020, you decide it’s time to sell the stock. The stock is now worth $1,500 in the market. When you sell the stock, you will realize a $500 capital gain or profit ($1,500-$1,000 = $500). Capital gains from assets like stocks and bonds are how Wall Street traders make money.

Real estate property investment can also become portfolio income. Even if you own a commercial property for which you collect rent, you can still realize capital gains as well. For example, if you decide to sell your commercial real estate investment, you may profit from the sale (assuming the property is sold for more than you paid for it).

Real Estate Investment Trusts (REITs)

A REIT, or real estate investment trust, is a company that owns and manages real estate assets. REITs take advantage of special tax savings, allowing them to incur minimal corporate income tax. In addition, a REIT pays dividends, a type of passive income for commercial real estate investors. Historically, many REITs have paid increasing dividends each year, which means your passive income stream might grow with little effort.

However, with any investment comes risk. Some REITs are inherently riskier than others. For example, a REIT fund that contains a large number of commercial property investment assets will be less risky than owning one REIT stock with less diversification.  In addition, determining which REITs to invest in can require significant time for a business analysis of each business’s records.

Another risk with REITs is reduced dividend income. Historically, during economic downturns such as the real estate market crash of 2008, REITs lose significant value. When this occurs, dividend income can be slashed or removed completely.

Where Should I Buy Investment Property?

Shifting Populations: People are Leaving the Big CitiesCash Flow Real Estate

It’s important to understand that real estate prices are likely going to decrease in the near future. Namely, the reason for this is that demand will begin to shrink to reflect a weak economy. In addition, migration will slow and knowing where to buy can maximize smart real estate investments. However, there will be winners and losers in the market short term. For example, it appears that in the short term, a divided real estate market may present itself. In addition, keep in mind that each city has its own real estate market that varies.

Current data being reported in the media shows people leaving larger coastal cities and going to smaller inland cities. For example, Californians have been moving out of California to places like Washington, Arizona and Texas in record numbers. This is not a new phenomenon and the trend appears to be gaining speed.

As a result, larger coastal cities like Los Angeles and New York City are seeing reductions in demand for real estate as residents leave the cities permanently. In turn, smaller cities like Phoenix and Las Vegas are experiencing higher demand for real estate as residents move in from the coastal cities.

It appears that in the short term, cities where people are moving to (like Las Vegas) may see higher prices during the coming real estate bubble deflation. The worst-case scenario for cities receiving the influx of those moving from elsewhere would be that property values would remain steady.

Juxtaposed to this phenomenon, larger cities are seeing an increase in available real estate, causing supply to outpace demand. As a result, prices are already dipping lower in cities seeing a mass exodus.

Are You in a Growing or Shrinking Real Estate Market?

The lesson here is that in order to make logical real estate market predictions for your home market, determine whether you are in an area where people are moving to or from. For example, if you live in Phoenix, Arizona, you are probably in a strong market that is attracting Californians. As a result, prices will likely be stable or even positive in the near term.

Now, one other caveat to consider is the state of the economy currently. Unfortunately, unemployment rates are high the US. Higher unemployment rates are negative for home buyers and are typically seen as a harbinger for decreased demand. As a result, unemployment may cause a decline in home buying nationwide. But we still haven’t answered the question of where the best place to buy rental property might be. Let’s take a closer look at demographics.

Demographic Changes

In “The Demographic Cliff” by Harry Dent, it is noted that the baby boomer generation (“Boomers”), those born between approximately 1946-1964, are retiring now. As a result, these baby boomers will be down-sizing from larger homes to smaller homes and buying vacation homes.

Prior to the COVID-19 Pandemic people were already beginning to shift in where they lived and how they lived. Now, the changes in living patterns and demographics have been accelerated. In general, more people will move out of bigger cities and move to areas with less dense populations. For example, people are moving out of cities like Los Angeles and moving to places like Idaho. Obviously, buying in expanding markets like Idaho will be more likely to maximize your smart real estate investments through cash flow.

Individuals are selling expensive homes and flats and buying more affordable properties to replace the high priced, big city real estate. Boomers are selling their large family homes and moving into smaller, more affordable homes.

Rental Properties

How to Invest in Real estate passive income

You may be wondering how the big real estate investors acquire so many properties in just a few years. Well, the secret to buying more investment properties is using the “BRRRR” strategy. So, what is BRRRR and how will it help in buying more investment houses?

The BRRRR Real Estate Strategy for Real Estate Passive Income

“BRRRR” stands for buy, rehab, rent, refinance and repeat. The BRRRR investment strategy has been very effective for successful real estate investors. It allows investors to build a portfolio of investment properties quickly. In addition, it requires using less personal capital. Let’s breakdown this step-wise process to understand the details and the order of this strategy.

Step 1: Buy Real Estate Investment Properties

Buy Undervalued Properties and Calculate Profitability Before Jumping In

Once you have determined that you want to focus on real estate passive income, such as apartments, duplexes or larger complexes, it’s time to buy. First, you will want to search for real estate passive income via undervalued or significantly discounted properties. Many investors credit their profit margins to buying investment houses at prices that are significantly below the potential market value.

Next, after screening properties, you must do some calculations. One calculation that can help determine whether the real estate passive income you have chosen is profitable is the After-Repair Value (ARV). This will tell you what the potential investment property is worth after it has been rehabbed. If the cost to rehab a home is too high, profitability can be an issue. In turn, this can jeopardize your BRRRR strategy.

Finally, you will want to conduct a rental analysis. A rental analysis is a process of determining how much rental income the property is capable of generating. You will use this value in your overall profitability calculation for the deal.

Some other considerations: Don’t forget to include costs such as closing costs, rehab costs and the amount of cash that you will put down for financing. Many investors expect to use 20% down for investment houses. Clearly the BRRRR method is a great way to create smart real estate investments.

Step 2: Rehab Investment Property

The next step in the BRRRR process is to begin repairing and renovating (rehabbing) the real estate passive income investment property. The object of the rehab is to quickly conduct repairs that will make the home appealing, safe and add value to the property. In addition, you want to rehab the property as quickly as possible. Furthermore, the quicker the process of rehab is complete, the quicker you can begin earning money from rental income.

Step 3: Rent Investment Property

After completion of the property rehab, it’s time to find a tenant for your property. A good tenant will consistently provide income (in the form of rent), creating cash flow  for your smart real estate investments. Furthermore, a good renter will take care of your property and not allow it to be damaged. Carefully determine what the market rental rate is for your area. In turn, this will ensure that you quickly find a renter and the property doesn’t sit vacant for months. In addition, you will want to properly vet potential tenants to make sure you find renters who are the best fit.

Step 4: Refinance Your Investment Property

Challenges of Working with Lenders, Obtaining Financing and Economic Cycles

The third “R” in the BRRRR process is refinance. After rehabbing the property and finding a renter, you can begin to look for a lender. The refinancing process means you will be working with a bank to borrow money based upon the remaining equity in the property. However, there are several things to know about refinancing real estate.

First, banks typically only lend approximately 75% or less of the appraised value of the property in a cash-out refinance. The lender will consider your credit score when determining whether to lend money to you. In addition, you may need to demonstrate that the property is generating rental income and is legitimately appraised at the value you say it’s worth.

Dealing with banks can be a slow, frustrating process. Keep in mind that banks only lend money in situations where they feel that the money is secure. Furthermore, they don’t want to lose money or lend too much money out for an overvalued property. In addition, economic cycles can change factors such as interest rates and credit flow. For example, after the 2008 housing crisis, it was very difficult to obtain a loan from banks and the BRRRR method was not smooth.

Step 5: Repeat the Process

If everything lines up correctly, the BRRRR method will be a success. You will find an undervalued property, buy the property, rehab and rent it and then obtain financing that you can use to buy the next property. You can then repeat the process of acquiring investment houses. If the BRRRR method is successful, you will be generating a net profit each month.

Getting Started with Real Estate Passive Income

Buy Where There is Growth and Population Movement – The South and West United States

One rule that smart real estate investors use is to buy properties where populations are growing. Population growth and population movement tend to drive prices up in real estate markets. Basic economics tells us that when there are more people demanding housing, supply cannot keep up with demand. As a result, prices go up, which is good for landlords. This is how smart real estate investments are made.

For many years, there has been growth in the South and Western United States. For example, a United States Census Bureau 2019 Article states that of the 15 cities in the US with the most growth, eight of them were in the South, six were in the West and one in the Midwest. Popular cities include places like Phoenix, Arizona, San Antonio, Texas and Jacksonville, Florida.

Smart Real Estate Investments: Wrap Up

Hopefully this article has helped you understand real estate passive income and how to generate cash flow in smart real estate investments. Buying real estate to generate passive income as an investment can be a great opportunity for generating wealth for many years. Using the BRRRR method for acquiring investment properties is a proven strategy for success in generating passive income. In addition, real estate may be a safer investment right now compared with other options.

Read More:

Housing Market Crash of 2021

Best Place to Buy Rental Property

Why Saving Money is Important

Investment Houses

10 Things to Know Before Starting a Budget

Value Investing Books

Home Buying Power

Real Estate Market Predictions

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, in order to help you make the best choice for you.

Categories
Real Estate

Getting A House Ready For Sale

Wondering what to do when getting a house ready for sale? We have compiled a list of tips on how you can get your home ready so that you are well prepared for the day it is listed for sale. Following these tips will help you uncover potential problems, reduce headache and sell the property faster.

However, before placing the for-sale sign in your front yard, there are some questions you should ask. Getting a house ready for sale is a big step and you should not take it lightly. In fact, there are many considerations to take into account prior to determining where you are moving.

Part I: Understanding the Implications and Costs of Moving

One important factor homeowners should consider before putting a for sale sign in their front yard is whether to sell the house. If you are asked a financial question before moving across the street or into the countryside, financial experts have advice for pensioners looking for a new home to boost their retirement income. Furthermore, you don’t have to trade your snowshoes for flip-flops, but if you get financial questions about moving, you could.

Typical Budget Expenses

Average electricity and water bills can also vary from state to state, and experts say when you move into a city, consider what that means for your wallet. In addition, home buyers should talk to their agent in the new area about the cost of utilities and other expenses associated with their new home or home. Finally, discuss insurance issues with your broker to determine all insurance-related issues, such as deductibles and co-pay.

Apartments and condominiums in urban centers typically cost more per square meter than suburban homes. Moreover, when people move from the suburbs to the urban centers, the cost difference can be more than $1,000 a year higher than in the suburbs. As a result, the higher costs could be offset by not needing a car. As a result, this could mean savings on insurance payments for your car.

Tax Considerations

For Social Security, it’s important to find out if there’s a death tax in your new area. For example, if you settle in an area with high inheritance taxes, it can affect the inheritance that would be passed on to your family. Pensioners should also check whether their new state will tax their benefits. In turn, this may determine if they will have to pay income tax or not. Some states, such as New York, California and New Jersey, do not include Social Security in their tax calculations.

Make sure you know how much your home is worth before you sell it or put it on the market. This is especially important if you do not intend to add your house to the list but decide to sell the house because someone knows.

Using a Real Estate Agent

Ask an experienced estate agent for an accurate estimate of selling price in your area. For example, home assessments that are issued one day can quickly become obsolete the next. Anyone who has lived in a house for decades knows the value of their property and its value. There are probably many households that have two or three properties in the same area, or even more than one property.

Depending on how much you have, this can be a long process, but give yourself plenty of time. Some experts say you should buy a home before putting it on the market.

A small correction can help boost profits in today’s sellers’ market. As a result, be aware before you make minor repairs and updates to your home. Furthermore, a low-budget project that will give the house A cleaner, brighter feeling than replacing an old light bulb. There are even companies that can help you sort, organize and throw away, but it’s up to you.

Part II: Getting a House Ready for Sale

Of course, there are other factors that contribute to how successful your home sale is. However, this article focuses on what you can do to get a head start in preparing your home for sale. Now that you are certain that you want to move, let’s talk about what the process is like. In addition, we discuss decisions you need to make for getting a house ready for sale. Furthermore, when you learn the basics of getting a house ready for sale, you must consider all the formalities. This article will focus on getting the house listed on Zillow and Trulia, popular real estate websites. Additionally, pay a photographer, place your ad, have the description displayed, prepare for the description of the ad, etc.

Use a Reputable Inspector

Some inspections are not required when you sell your home. However, they are one of the best investments when you are getting your home ready for sale. For example, a house inspection can make it easier for buyers to make an offer for the house. In addition, you leave the house viewings with a better understanding of what is going on.

Remember that the money you put into preparing your home will help you earn more money in the long run. Take the time to get it ready for sale and make sure you get a high return on your investment. Conducting a house inspection before you start marketing your home saves you time, money, frustration and more.

Find a Good Real Estate Agent

Choosing a reputable estate agent to guide you through the process of selling your home is a great start. However, there are also steps you can take to ensure it is sold at a good price. Moreover, your agent will help you getting a house ready for sale by evaluating your situation. They can identify improvements that will increase its value and set a list price for you. Furthermore, the agent can determine the price at which you want to sell the house. In addition, they assess details such as the size of your property and the number of bedrooms.

Your real estate agent should be someone you feel comfortable with and trust to sell your home for a top dollar. In addition, they give you a real-time view of what it’s like to sell a house. Furthermore, they help you decide if now is the right time for you financially and emotionally.

Your agent should be able to provide you with a responsible and effective plan for selling your home. If you have the right attitude, you can learn about getting a house ready for sale. In contrast, if you decide to sell a house to a property investor for a fair cash deal, you should be aware of all the steps you need to take to prepare for it.

Develop a Plan of Action

If you spend a little time getting a house ready to sell, you will be rewarded with a faster sale and a higher sale price. When you are closing the deal at the desired price, you should find out how to getting a house ready for sale and what you can achieve if you prepare it before selling. With the help of a reputable estate agent, you can have a house “ready for sale” before it even hits the market.

If you want to getting a house ready for sale within 30 days, you need to come up with a solid plan, hire a reliable team and have the tenacity to stick to the task.

If you learn how to getting a house ready for sale, you can put the property on the market in no time. From cleaning, photography, staging and curbing the appeal, here’s our how – as a guide to getting your homes ready for sale.

Finding the Right Price

If you are in a bind to sell your home quickly, you should make sure how much a cash buyer is for your home as is. This is by far one of the biggest things you have to do when you sell a house, when you choose a price that means the house actually gets a show. Finding the house and getting a house ready for sale is the most effective measure you can take to ensure a successful outcome with every house sale. Proper cleaning can be an important part of getting a house ready for sale, while clearing up clutter, repairing things and refreshing the paint.

Wrap Up: Getting a House Ready for Sale

As you can see, there is a lot to know and do when it comes to getting a house ready for sale. However, with the right amount of planning, a little hard work and building the right team, it can be done to maximize profit for a quick sale.

Read More:

Housing Market Crash of 2021

Best Place to Buy Rental Property

Why Saving Money is Important

Investment Houses

10 Things to Know Before Starting a Budget

Value Investing Books

Home Buying Power

Real Estate Market Predictions

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, in order to help you make the best choice for you.

Categories
Real Estate

Real Estate Opportunities

In 2021, there are many ways to create real estate opportunities. In addition, when it comes to real estate investment, there are three types of income that you should understand: Earned Income, Passive Income and Portfolio Income. This model of income has been taught by Robert Kiyosaki, real estate investor. He discusses these concepts in his book, “Rich Dad, Poor Dad.”

In this article we not only discuss real estate opportunities, but also how to generate money from many different types of real estate investment. This includes the BRRRR method for rentals and Real Estate Investment Trusts. We also make some predictions for the future.

Earned Income

If you work at an 8-5 job, working Monday through Friday, you receive earned income. You might be a manager, a cashier or a trucker. For example, you may be paid hourly or by salary. As a result, if you don’t work, then you don’t typically get paid. Essentially, you are trading your time for money.

There are 24 hours in a day and 168 hours in any given week. Most people work a 40-hour work week shift. However, even if you worked every hour of each day, there is a limit to how much money you can earn. Even if you wanted to work 30 hours a day (which is impossible), you cannot violate the laws of universe.

In addition, there are limits on taxation with earned income. The IRS has established tax rates for all earned income, based on your earning bracket. For example, a single person who makes $40,125 – $85,525 is taxed at a rate of 22%. Money is automatically taken from your salary each month. The tax money is then sent directly to the IRS. Although there are things you can do to reduce your tax bill, there’s not much wiggle room on how much the IRS takes.

Creating Real Estate Opportunities with Passive Income

Passive income is one of the best ways to generate real estate opportunities. As a result, it is simply earning money with little or no effort. Moreover, with passive income, you earn money while you sleep or vacation. Although this idea may sound impossible, it is a secret that millionaires and billionaires have utilized for hundreds of years to become wealthy through real estate opportunities.

Common examples of passive income include owning commercial property investment rental properties. Of course, there are other examples of passive income, like stock dividends, high-yield savings accounts, annuities, and real estate investment trusts (REITs) as well.

Unfortunately, although passive income may seem like easy money, it’s not. Generating passive income requires upfront work that lays the groundwork for future income. It is not a get-rich-quick scheme. In addition, it may require some additional work as you move forward. For example, if you own a commercial rent property, you will be required to pay for property maintenance, improvements, taxes and insurance on your investment.

Methods to Make Money Investing in Real Estate

Rental Income, Appreciation, Tax Deductions, Creative Services

Rental Income

The most common way to make money via real estate opportunities is to generate rental income. Rental income is a type of passive income that is generated from charging tenants of a property rent each month.

Examples of rental income sourced through real estate opportunities include medical facilities, warehouses, business offices, strip shopping centers and the like. Ideally, successful commercial property investment involves selecting an area where growth is occurring or that is densely populated. The investor purchases commercial property in these areas and then leases space to tenants, generating passive rental income.

In addition, when searching for any real estate property you want to maximize the quality of your investment. Purchasing properties that require minimal improvements or renovations is best. Moreover, the property purchased should be at or below market value. Obviously, you don’t want to buy a property in the middle of a real estate bubble, which could be worth less the following year. In addition, purchasing at the right price will maximize the real estate opportunities you receive.

Appreciation

Next to generating rental income, appreciation of property values is the second most well-known way to generate income and real estate opportunities. Property appreciation occurs when market prices increase overall or when improvements are made to a property.

Recently, the United States has seen significant increase in market prices across the board for real estate. In fact, many experts believe that the real estate market has been in a bubble and prices are at an all-time high.

However, even if the market didn’t lift the value of your commercial property, it may have increased simply as a result of capital improvements. For example, if you own an apartment complex, perhaps you added covered parking to the complex or installed a swimming pool. Both of these would be considered improvements, which would theoretically increase the value of the property. Appreciation, or an increase in the value of the property would only be realized upon sale of the property.

Getting A House Ready To Sell

Creative Services

There is a great way to generate income from your commercial properties that many people don’t even consider. There may be opportunities at your properties for add-ons or additional services that you haven’t considered. For example, installing vending machines or charging for covered parking. The only limit to providing these services is your own creativity.

Many of these services require little or no expense, effort or improvement to the property. For example, having a third-party vendor install a vending machine can cost nothing. Yet, you can earn a percentage of sales from the vending machines by contracting with the vending company.

Tax Deductions and Depreciation

There are many tax deductions for commercial real estate property owners. In many cases, when properties are treated as a “pass-through,” a tax deduction can be taken. Moreover, the tax savings can mean thousands of extra dollars in your pocket.

There are also depreciation options for certain landlords to take advantage of. These allow property owners to deduct the costs of personal property, such as onsite equipment, appliances, etc., from their taxable income. Follow up with your tax professional for more information regarding tax deductions.

Alternative Methods for Property Investment

Long Term Investment Income (Portfolio Income)

Portfolio Income from long term investments is earned is made by capital gains. Assets can be examples of portfolio income. For example, if you own stocks, bonds, property, etc., you have portfolio income. When you sell your assets, hopefully they have increased in value while you held them. As a result, during the sale you incur capital gains.

For example, let’s say you bought $1,000 worth of stock in 2018. Now, in 2020, you decide it’s time to sell the stock. The stock is now worth $1,500 in the market. When you sell the stock, you will realize a $500 capital gain or profit ($1,500-$1,000 = $500). Capital gains from assets like stocks and bonds are how Wall Street traders make money.

Real estate property investment can also become portfolio income. Even if you own a commercial property for which you collect rent, you can still realize capital gains as well. For example, if you decide to sell your commercial real estate investment, you may profit from the sale (assuming the property is sold for more than you paid for it).

Real Estate Investment Trusts (REITs)

A REIT, or real estate investment trust, is a company that owns and manages real estate assets. REITs take advantage of special tax savings, allowing them to incur minimal corporate income tax. In addition, a REIT pays dividends, a type of passive income for commercial real estate investors. Historically, many REITs have paid increasing dividends each year, which means your passive income stream might grow with little effort.

However, with any investment comes risk. Some REITs are inherently riskier than others. For example, a REIT fund that contains a large number of commercial property investment assets will be less risky than owning one REIT stock with less diversification.  In addition, determining which REITs to invest in can require significant time for a business analysis of each business’s records.

Another risk with REITs is reduced dividend income. Historically, during economic downturns such as the real estate market crash of 2008, REITs lose significant value. When this occurs, dividend income can be slashed or removed completely.

Where Should I Buy Investment Property?

Shifting Populations: People are Leaving the Big Cities

It’s important to understand that real estate prices are likely going to decrease in the near future. Namely, the reason for this is that demand will begin to shrink to reflect a weak economy. In addition, migration will slow and knowing where to buy can maximize the real estate opportunities. However, there will be winners and losers in the market short term. For example, it appears that in the short term, a divided real estate market may present itself. In addition, keep in mind that each city has its own real estate market that varies.

Current data being reported in the media shows people leaving larger coastal cities and going to smaller inland cities. For example, Californians have been moving out of California to places like Washington, Arizona and Texas in record numbers. This is not a new phenomenon and the trend appears to be gaining speed.

As a result, larger coastal cities like Los Angeles and New York City are seeing reductions in demand for real estate as residents leave the cities permanently. In turn, smaller cities like Phoenix and Las Vegas are experiencing higher demand for real estate as residents move in from the coastal cities.

It appears that in the short term, cities where people are moving to (like Las Vegas) may see higher prices during the coming real estate bubble deflation. The worst-case scenario for cities receiving the influx of those moving from elsewhere would be that property values would remain steady.

Juxtaposed to this phenomenon, larger cities are seeing an increase in available real estate, causing supply to outpace demand. As a result, prices are already dipping lower in cities seeing a mass exodus.

Are You in a Growing or Shrinking Real Estate Market?

The lesson here is that in order to make logical real estate market predictions for your home market, determine whether you are in an area where people are moving to or from. For example, if you live in Phoenix, Arizona, you are probably in a strong market that is attracting Californians. As a result, prices will likely be stable or even positive in the near term.

Now, one other caveat to consider is the state of the economy currently. Unfortunately, unemployment rates are high the US. Higher unemployment rates are negative for home buyers and are typically seen as a harbinger for decreased demand. As a result, unemployment may cause a decline in home buying nationwide. But we still haven’t answered the question of where the best place to buy rental property might be. Let’s take a closer look at demographics.

Demographic Changes

In “The Demographic Cliff” by Harry Dent, it is noted that the baby boomer generation (“Boomers”), those born between approximately 1946-1964, are retiring now. As a result, these baby boomers will be down-sizing from larger homes to smaller homes and buying vacation homes.

Prior to the COVID-19 Pandemic people were already beginning to shift in where they lived and how they lived. Now, the changes in living patterns and demographics have been accelerated. In general, more people will move out of bigger cities and move to areas with less dense populations. For example, people are moving out of cities like Los Angeles and moving to places like Idaho. Obviously, buying in expanding markets like Idaho will be more likely to maximize your real estate opportunities.

Individuals are selling expensive homes and flats and buying more affordable properties to replace the high priced, big city real estate. Boomers are selling their large family homes and moving into smaller, more affordable homes.

Rental Properties

How to Invest in Real estate passive income

You may be wondering how the big real estate investors acquire so many properties in just a few years. Well, the secret to buying more investment properties is using the “BRRRR” strategy. So, what is BRRRR and how will it help in buying more investment houses?

The BRRRR Real Estate Strategy for Real Estate Passive Income

“BRRRR” stands for buy, rehab, rent, refinance and repeat. The BRRRR investment strategy has been very effective for successful real estate investors. It allows investors to build a portfolio of investment properties quickly. In addition, it requires using less personal capital. Let’s breakdown this step-wise process to understand the details and the order of this strategy.

Step 1: Buy Real Estate Investment Properties

Buy Undervalued Properties and Calculate Profitability Before Jumping In

Once you have determined that you want to focus on real estate passive income, such as apartments, duplexes or larger complexes, it’s time to buy. First, you will want to search for real estate passive income via undervalued or significantly discounted properties. Many investors credit their profit margins to buying investment houses at prices that are significantly below the potential market value.

Next, after screening properties, you must do some calculations. One calculation that can help determine whether the real estate passive income you have chosen is profitable is the After-Repair Value (ARV). This will tell you what the potential investment property is worth after it has been rehabbed. If the cost to rehab a home is too high, profitability can be an issue. In turn, this can jeopardize your BRRRR strategy.

Finally, you will want to conduct a rental analysis. A rental analysis is a process of determining how much rental income the property is capable of generating. You will use this value in your overall profitability calculation for the deal.

Some other considerations: Don’t forget to include costs such as closing costs, rehab costs and the amount of cash that you will put down for financing. Many investors expect to use 20% down for investment houses. Clearly the BRRRR method is a great way to create real estate opportunities.

Step 2: Rehab Investment Property

The next step in the BRRRR process is to begin repairing and renovating (rehabbing) the real estate passive income investment property. The object of the rehab is to quickly conduct repairs that will make the home appealing, safe and add value to the property. In addition, you want to rehab the property as quickly as possible. Furthermore, the quicker the process of rehab is complete, the quicker you can begin earning money from rental income.

Step 3: Rent Investment Property

After completion of the property rehab, it’s time to find a tenant for your property. A good tenant will consistently provide income (in the form of rent), creating real estate opportunities for your investment. Furthermore, a good renter will take care of your property and not allow it to be damaged. Carefully determine what the market rental rate is for your area. In turn, this will ensure that you quickly find a renter and the property doesn’t sit vacant for months. In addition, you will want to properly vet potential tenants to make sure you find renters who are the best fit.

Step 4: Refinance Your Investment Property

Challenges of Working with Lenders, Obtaining Financing and Economic Cycles

The third “R” in the BRRRR process is refinance. After rehabbing the property and finding a renter, you can begin to look for a lender. The refinancing process means you will be working with a bank to borrow money based upon the remaining equity in the property. However, there are several things to know about refinancing real estate.

First, banks typically only lend approximately 75% or less of the appraised value of the property in a cash-out refinance. The lender will consider your credit score when determining whether to lend money to you. In addition, you may need to demonstrate that the property is generating rental income and is legitimately appraised at the value you say it’s worth.

Dealing with banks can be a slow, frustrating process. Keep in mind that banks only lend money in situations where they feel that the money is secure. Furthermore, they don’t want to lose money or lend too much money out for an overvalued property. In addition, economic cycles can change factors such as interest rates and credit flow. For example, after the 2008 housing crisis, it was very difficult to obtain a loan from banks and the BRRRR method was not smooth.

Step 5: Repeat the Process

If everything lines up correctly, the BRRRR method will be a success. You will find an undervalued property, buy the property, rehab and rent it and then obtain financing that you can use to buy the next property. You can then repeat the process of acquiring investment houses. If the BRRRR method is successful, you will be generating a net profit each month.

Getting Started with Real Estate Passive Income

Buy Where There is Growth and Population Movement – The South and West United States

One rule that smart real estate investors use is to buy properties where populations are growing. Population growth and population movement tend to drive prices up in real estate markets. Basic economics tells us that when there are more people demanding housing, supply cannot keep up with demand. As a result, prices go up, which is good for landlords. This is how real estate opportunities is generated.

For many years, there has been growth in the South and Western United States. For example, a United States Census Bureau 2019 Article states that of the 15 cities in the US with the most growth, eight of them were in the South, six were in the West and one in the Midwest. Popular cities include places like Phoenix, Arizona, San Antonio, Texas and Jacksonville, Florida.

Real Estate Opportunities Wrap Up

Hopefully this article has helped you understand real estate passive income and how to generate real estate opportunities. Buying real estate to generate passive income as an investment can be a great opportunity for generating wealth for many years. Using the BRRRR method for acquiring investment properties is a proven strategy for success in generating passive income. In addition, real estate may be a safer investment right now compared with other options.

Read More:

Housing Market Crash of 2021

Best Place to Buy Rental Property

Why Saving Money is Important

Investment Houses

10 Things to Know Before Starting a Budget

Value Investing Books

Home Buying Power

Real Estate Market Predictions

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

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