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Now is a very good time to begin investing in Phoenix real estate or to increase the number of properties in your real estate investment portfolio. Homes for sale in Chandler, Gilbert, and Mesa AZ make excellent real estate investment property, capable of producing positive monthly cash flow with 20-25% down payment loans after all costs and property management fees are paid.
A joint venture between Merrill Lynch and Bank of America offers investors the ability to finance 100% of the cost of investment property with an interest-only loan by pledging assets in their Merrill Lynch account equal to ~ 39% of the purchase price of the investment property as collateral. 100% of the money in your Merrill Lynch account remains fully invested.
As the Arizona economy expands and high tech companies continue migrating here from California and elsewhere, insightful investors who own Phoenix investment property continue to be rewarded with steady property appreciation and rising rental rates.
Phoenix real estate investors are able to reduce the amount of taxes owed on an annual basis by using rental investment property deductions to offset earned income. Tax breaks often enable investors to turn write-offs into after-tax cash flow. You may deduct actual costs you incur for financing, managing and operating the rental property. This includes mortgage interest payments, real estate taxes, insurance, maintenance, repairs, property management fees, travel, advertising, and utilities (assuming the tenant doesn't pay them). These expenses can be subtracted from your adjusted gross income when determining your personal income taxes, providing deductions do not exceed the amount of the rental income you receive from.
Good record keeping is important for determining your current and future tax obligations, but it is equally important for determining the performance of your investment properties and its value when you decide to sell. Poor recordkeeping makes it difficult for a buyer to estimate the cost of deferred maintenance and net income the property will generate after expenses.
It is important to stay within your comfort zone. If you are uncomfortable with one investment option, continue looking for another until you find a choice that makes you comfortable. Real estate investment pays off over time. Make a plan, choose the property wisely, plan for the unexpected, be patient and have an exit strategy, if you decide that's your best choice.
In addition to deductions for operating costs, you also receive tax breaks for depreciation. Buildings are given an economic life expectancy and a depreciation schedule allows these "losses" to be deducted over time, even though proper maintenance prevents building deterioration and property market values normally appreciate. Because depreciation is a non-cash expense -- you are not actually spending any money -- the tax code can get a bit tricky. Even if you do not deduct your depreciation allowance when you file your tax forms, the IRS assumes you have and expects to recapture the depreciation allowance. For more information about depreciation and various tax alternatives, ask your tax adviser about Section 1031 of the U.S. Tax Code.
There are two kinds of positive cash flows: Pretax and After-tax. A pretax positive cash flow occurs when income received is greater than the expenses incurred. This is more difficult to find due to high demand for real estate causing real estate prices to rise. Property generating pretax positive cash flow is desirable as a strong and secure real estate investment.
An after-tax positive cash flow may have expenses that outweigh collected income, but various tax breaks provide a positive cash flow. This is more common, but it is generally not as desirable as a pretax positive cash flow. High-income investors want and need real estate write-offs.
Regardless of what kind of Phoenix real estate investment you choose to invest, timely collections from your tenants are absolutely necessary. A positive cash flow -- whether it be pretax or after-tax -- requires rental income. Be sure to find quality tenants and perform a thorough credit and employment check. It is much cheaper to pay to screen tenants than incur rental income loss and the expense of finding a new tenant. A reliable property manager will save you money, time and anxiety. Call Sam for recommendations.
One of the most important factors in determining a solid investment is the amount of equity you are purchasing. Equity is the difference between the actual worth of the property and the balanced owed on the mortgage. Initially, your equity was your down payment paid in cash and the difference between current market value and the purchase price. Over time your equity grows, by simply applying the rent to reduce your loan balance. Market appreciation and tax write-offs just make real estate investment more appealing.
I have lending sources offering "no recourse loans" within a Roth IRA Self Directed Account to leverage investment property purchases.
Benefit from Growing Equity
While investing in real estate is relatively complex, current income and potential capital gains derived from Chandler and Gilbert homes for sale are well worth the time to locate and acquire. When compared to other financial investments, like bonds or CD's, return on investment for real estate purchases can often be far greater.
The goal of Phoenix real estate investing is equity. Decide the amount of equity you want to achieve. When you reach your goal, it's time to evaluate whether you want to 1) change your equity goal and stay in your current investment, 2) sell and 1031 tax-deferred exchange or 3) refinance to take out money and reinvest in a more lucrative investment elsewhere. You may need the assistance of a real estate professional and a tax adviser to determine your current equity. Call Sam now to request a no obligation valuation of your real estate investment property today.
Tips for Buying Rental Property, Quick Calculators to determine investment property value, evaluating your LLC is working for you and providing protection you need, how you can buy and manage real estate rental property within your IRA to build a bigger retirement nest egg, determining a 1031 exchange is right for you or when to sell and/or upgrade your investment properties.
Thanks for visiting! Contact Sam or call 480-213-1799 when you are ready to buy, sell or exchange Phoenix AZ real estate investment property! I have helped many investors locate and acquire exceptional Phoenix real estate investment opportunities!
My Phoenix Home Buyer Guide provides helpful buyer tips and additional resources available to assist you with your home purchase and my Phoenix Home Seller Guide is designed to aid the Seller in maximizing net gain upon sale.