Twitter
LinkedIn
YouTube
Facebook

Why Real Estate Investing Makes (Dollars and) Sense

INTRODUCTION

Turn on the television or scroll through Facebook, and chances are you’ll see at least one advertisement for a group or “guru” who promises to teach you how to “get rich quick” through real estate investing. The truth is, much of what they’re selling are high-risk tactics that aren’t a good fit for the average investor. However, there is a way to make steady, predictable, low-risk income through real estate investing. In this blog post, we’ll examine the tried-and-true tactics that can be used to increase your income, pay off debt … even fund your retirement!

WHY INVEST IN REAL ESTATE?

One of the basic principles of real estate investment lies in this fact: everyone needs a place to live. And according to the Bureau of Labor Statistics’ most recent Consumer Expenditures Survey, housing is typically an American’s largest expense.1 But there are other reasons why real estate is a great investment choice, and we’ve outlined the top five below:

  1. Appreciation
    Appreciation is the increase in your property’s value over time. History has proven that over an extended period of time, the value of real estate continues to rise. That doesn’t mean recessions won’t occur. The real estate market is cyclical, and market ups and downs are natural. In fact, the U.S. housing market took a sharp downturn in 2008, and many properties took several years to recover their value. However, in the vast majority of markets, the value of real estate does grow over the long term.The S&P CoreLogic Case-Shiller National Home Price Index, which tracks U.S. residential real estate prices, released its latest results on August 29 with the headline “National Home Price Index Rises Again to All Time High.”2

    While no investment is without risk, real estate has proven again and again to be a solid choice to invest your money over the long term.
    Source: ZeroHedge3
  2. Hedge Against Inflation
    Inflation is the rate at which the general cost of goods and services rises. As inflation rises, prices go up. This means the money you have in your bank account is essentially worth less because your purchasing power has decreased.Luckily, real estate prices also rise when inflation increases. That means any money you have invested in real estate will rise with (or often exceed) the rate of inflation. Therefore, real estate is a smart place to put your money to guard against inflation.
  3. Cash Flow
    One of the big benefits of investing in real estate over the stock market is its ability to provide a fairly steady and predictable monthly cash flow. That is, if you choose to rent out your investment property to a tenant, you can expect to receive a rent payment each month.If you’ve invested wisely, the rent payment should cover the debt obligation you may have on the property (i.e. mortgage), as well as any repairs and maintenance that are needed. Ideally, the monthly rental income would be great enough to leave you a little extra cash each month, as well. You could use that extra money to pay off the mortgage faster, cover your own household expenses, or save for another investment property.Even if you only take in enough rent to cover your expenses, a rental property purchase will pay for itself over time. As you pay down the mortgage every month with your rental income, your equity will continue to increase, until you own the property free and clear … leaving you with residual cash flow for years to come.As the owner, you will also benefit from the property’s appreciation when it comes time to sell. This can be a great way to save for retirement or even fund a child’s college education. Purchase a property when the child is young, and with a little discipline, it can be paid off by the time they are ready to go to college. You can sell it for a lump sum, or use the monthly income to pay their tuition and expenses.
  4. Leverage
    One of the unique features that sets real estate apart from other asset classes is the ability to leverage your investment. Leverage is the use of borrowed capital to increase the potential return of an investment.For example, if you purchase an investment property for $100,000, you might put 10% down ($10,000) and borrow the remaining $90,000 in the form of a mortgage.Even though you’ve only invested $10,000 at this point, you have the ability to earn a profit on the entire $100,000 investment. So, if the property appreciates to $120,000 – a 20% increase over the purchase price – you still only have to pay the bank back the original $90,000 (plus interest) … and you get to keep the $20,000 profit.That means you made $20,000 off of a $10,000 investment, essentially doubling your money, even though the market only went up by 20%! That’s the power of leverage.
  5. Tax Advantages
    One of the top reasons to invest in real estate is the tax benefit. There are numerous ways a real estate investment can save you money each year on taxes:Depreciation
    When you record your income from a rental property on your annual tax return, you get to deduct any expenses associated with the investment. This includes interest paid on the mortgage, maintenance, repairs and improvements, but it also includes something called depreciation.Depreciation is the theoretical loss your property suffers each year due to aging. While it’s true that as a home ages it will structurally need repairs and systems will eventually need to be replaced, we’ve also learned in this post that the value of real estate appreciates over time. So getting to claim a “loss” on your investment that is actually gaining in value makes real estate an appealing investment choice.Serial Home Selling
    Even if you’re not interested in owning a rental property, other types of real estate investments offer tax advantages, as well. Generally, when you own an investment property you pay a capital gains tax on any profits you make when you sell the property.However, when you sell your principal residence, you are exempt from paying taxes on capital gains (up to $250,000 for singles and $500,000 for couples). The Internal Revenue Service (IRS) only requires that you live in the house for two of the previous five years. That means you can purchase an investment property, live in it while you remodel it, and then sell it for a tax-free profit two years later. This can be a great way to get started in real estate investing.Section 1031 Exchanges
    In addition to profiting off of your personal residence tax free, it is possible to sell an investment property tax free if you do it through a 1031 Exchange. If structured properly, the IRS Tax Code enables an investor to sell a property and reinvest the proceeds in a new property while deferring all capital gains taxes.

    Tax-Deferred Retirement Account
    It’s a common misconception that you can only purchase financial instruments (i.e. stocks, bonds, mutual funds, etc.) through an Individual Retirement Account (IRA) or 401(k). In actuality, the IRS allows individuals to invest retirement funds in real estate and other alternative types of investments, as well. By purchasing your investment property through an IRA, you can take advantage of all of the tax savings these accounts offer.

    Be sure to consult a tax professional regarding all tax matters related to your real estate investments. If structured correctly, the profits you earn on your real estate investments can be largely shielded from tax liability. Just another reason to choose real estate as your preferred investment vehicle.

TYPES OF REAL ESTATE INVESTMENTS

While there are numerous ways to invest in real estate, we’re going to focus on three primary ways average investors earn money through real estate. We touched on several of these already in the previous section.

  1. Remodel and Resell
    HGTV has countless “reality” shows featuring property flippers who make this investment strategy look easy. Commonly referred to as a “Fix and Flip,” investors purchase a property with the intention of remodeling it in a short period of time, with the hope of selling it quickly for a profit.This is a higher-risk tactic, and one for which many of the real estate “gurus” we talked about earlier claim to have the magic formula. They promise huge profits in a short amount of time. But investors need to understand the risks involved, and be prepared financially to cover additional expenses that may arise.Luckily, an experienced real estate agent can help you identify properties that may be good candidates for this type of investment strategy… and help you avoid some of the pitfalls that could derail your plans.
  2. Traditional Rental
    One of the more conservative choices for investing in real estate is to purchase a rental property. The appeal of a rental property is that you can generate cash flow to cover the expenses, while taking advantage of the property’s long-term appreciation in value, and the tax benefits of investing in real estate. It’s a win-win, and a great way for first-time investors to get started.And according to the U.S. Bureau of Labor Statistics, rents for primary residences have increased 21.9 percent between 2007 and 2015 as demand for rental units continues to grow.1
  3. Short-term Rental
    With the huge movement toward a “sharing economy,” platforms that facilitate short-term rentals, like Airbnb and HomeAway, are booming. Their popularity has spurred a growing trend toward dual-purpose vacation homes, which owners use themselves part of the year, and rent out the remainder of the time. There are also a growing number of investors purchasing single-family homes for the sole purpose of leasing them on these sites.Short-term rentals offer several benefits over traditional rentals, which many investors find attractive, including flexibility and higher profit margins. However, the most profitable properties are strategically located near popular tourist destinations. You’ll need an experienced real estate professional to help you identify the right property if you want to be successful in this highly-competitive market.
DOES REAL ESTATE INVESTING SOUND TOO GOOD TO BE TRUE?

We’ve all heard stories, or maybe even know someone, who struck it rich with a well-timed real estate purchase. However, just like any investment strategy, a high potential for earnings often goes hand-in-hand with an increase in risk. Still, there’s substantial evidence that a well-executed real estate investment can be one of the best choices for your money.

Purchasing a home to remodel and resell can be highly profitable, as long as you have a trusted team in place to complete the remodel quickly and within budget … and the financial means to carry the property for a few extra months if delays occur.

Or, if you buy a house for appreciation and cash flow, you can ride through the market ups and downs without stress because you know your property value is bound to increase over time, and your expenses are covered by your rental income.

In either scenario, make sure you’re working with a real estate agent who has knowledge of the investment market and can guide you through the process. While no investment is without risk, a conservative and well-planned investment in real estate can supplement your income and set you up for future financial security.

If you are considering an investment in real estate, please contact us to set up a free consultation. We have experience working with all types of investors and can help you determine the best strategy to meet your investment goals.

Sources:

  1. Bureau of Labor Statistics Consumer Expenditure Survey Annual Report – https://www.bls.gov/opub/reports/consumer-expenditures/2015/home.htm
  2. S&P Dow Jones Indices Press Release –
    https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/574349_cshomeprice-release-0829.pdf?force_download=true
  3. Durden, T. (2016 November 29). US Home Prices Rise Above July 2006 Levels, Hit New Record High [blog post] ZeroHedge –
    http://www.zerohedge.com/news/2016-11-29/us-home-prices-rise-above-july-2006-levels-hit-new-record-hig
    h
**************************************************************************** © 2016 BHH Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc ®. Equal Housing Opportunity. Privacy Policy Sherry Fields 1020 South Ave. W., Missoula, MT 59801 | Phone: (406) 207-8448 | Email: Sherry.Fields@bhhsmt.com *******************************************************************************

18995 Moonlight Dr Frenchtown MT

18995 Moonlight Dr  SOLD

HUD homes sold ”as is” case #311-188353

Great 5 acre parcel in Frenchtown, fenced and cross fenced for animals. Large shop and shed. Serviced by private well and septic. Older mobile needs new roof, important to do an inspection.

Three bedrooms and two full baths. Large living room with a combo dining and family room adjacent the kitchen. The laundry room is also the mechanical room for the furnace and hot water heater as well as rear access to the backyard. Master bedroom and bath at one end and the other bedrooms and bath at the opposite end. Beautiful mountain views. Children bused to Frenchtown school.

**************************************************************************** © 2016 BHH Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc ®. Equal Housing Opportunity. Privacy Policy Sherry Fields 1020 South Ave. W., Missoula, MT 59801 | Phone: (406) 207-8448 | Email: Sherry.Fields@bhhsmt.com *******************************************************************************

1660 Shindig Dr Missoula MT 59808

SOLD

1660 Shindig Dr Missoula

 

 

Cute little home in a newer subdivision close to Hellgate school. There are two bedroom, one bath,  a laundry closet and single car garage with paved drive.

The open floor plan includes the living room kitchen and eating area. Kitchen well appointed with lots of cupboards and all appliances. Great opportunity to own your own home in Missoula at an extremely affordable price. Move in ready.

The water system is community owned and paid monthly by the homeowner. The fee is $40.00 currently.
HUD Case 311-216686. HUD homes are sold ”As Is’ All measurements are from CAMA deemed reliable but not guaranteed. Buyers & agents must do their own due diligence.

**************************************************************************** © 2016 BHH Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc ®. Equal Housing Opportunity. Privacy Policy Sherry Fields 1020 South Ave. W., Missoula, MT 59801 | Phone: (406) 207-8448 | Email: Sherry.Fields@bhhsmt.com *******************************************************************************

2330 Betty Lane Victor MT 59875

SOLD

2330 Betty Lane

HUD Case 311-180566. HUD homes are sold ”As Is”. 1981 manufactured Marlette

Serial #: H013064AB/DETITLED home on 0.46 acres. The backyard is fenced with a deck and a shed.

Open concept living room kitchen and dining rooms. The sliding glass doors lead to the deck and the back yard. Off the kitchen is the mud room with laundry facilities, the furnace and a side door to the garage and yard.

There is a wood burning stove in the living room. The master bedroom is at one end with a full bathroom while the other two bedrooms are at the opposite end with the other full bathroom.

Great neighborhood with well-kept landscaped properties and amazing views of both the Sapphire and Bitterroot mountains. For HUD Disclosures visit HUD Home Store

14535 Hellgate Lane Clinton MT 59825

SOLD

14535 Hellgate Lane

14535 Hellgate Overview | Clinton, MT BRANDED from VisionMediaSolutions.com on Vimeo.
01-Hellgate2

Looking for the best of country life yet close to Missoula? – Look no further. This great home has been remodeled top to bottom with new top of the line laminate floors throughout. Neutral interior paint including molding, trim, doors & windows brightens up the whole home. Brand new appliances and counter tops with tile back-splash enhance this ergonomically designed kitchen that is open on two sides one to the dining area and the other to the family room.

09-Kitchen 06-Office08-Livingroom

New commodes in bathrooms, glass shower doors, accent tiling, faucets, taps and new sink counter combos turn these bathrooms into luxury finished rooms. Modern light fixtures show off the beauty of the open concept of the main rooms and of course, the bedrooms and baths. And if that isn’t enough there is even a brand new state of the art high energy efficient furnace installed. A wall was added to the family room to remove the outdated railing.

15-WaterFountain 20-Gazebo02-P1130216 32-River 33-River

The exterior has had a face lift too with window flower boxes, an entrance Trellis with a graveled path and graveled driveway. Two new skylights have been added bringing more light into the house. The rear of the home boasts both a covered patio and a deck. A brick barbecue stands between the covered patio and the deck serving both fo31-Riverr all your entertainment needs. And the backyard … what a delight, the whole left side has been thinned out to provide a wonderful play yard, while the fully landscaped backyard holds a water fountain, gazebo, fire-pit and a patio for enjoying the great outdoors of Montana. The h30-Riverot tub off the master bedroom is negotiable.

The property is bordered on the east and north by county held parkland with access through to the Clark Fork River. The parkland is in the flood plain so s34-RiverRafttructures are not permitted giving you unhindered access and views of the river. For your personal showing call Sherry Fields, Realtor 406-329-2044, you’ll be glad you did.

1629 Thames St. Missoula MT 59801

1629 Thames St

 

 

 

 

 

 

100_3255 100_3256 100_3259 100_3260
Cute Bungalow on a larger lot for the area with landscaping including fruit trees, bushes and vines, a garage converted to a studio and a covered patio. Two bedrooms and a bath on the main level with the enclosed porch heated and insulated to make a den or office. The basement while unfinished does have storage and a laundry room.

16180 E Mullan Rd Clinton MT 59825

 

16180 E Mullan Rd

Front

 

 

 

 

 

 

 

 

 

 

Fully renovated and ready for you to move in, this 2 bedroom 1 bath charmer sits on .64 acres with Donovan Creek running through the parcel.

BAck

 

 

 

 

 

 

 

 

 

Kitchen

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Livingroom

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yard

Two New Certifications

Earlier this month I finished the online training to become a Certified Expert Home Buying Advisor. Just waiting for the physical certificate to get here by snail mail.

And tonight finished the Real Estate Digital Marketing Course

Certificate

 

 

 

1309 Honeyhouse Lane Corvallis MT 59828

Sold-2

Just Listed 1309 Honeyhouse in Corvallis MT

 

HUD homes sold ”as-is”. Very large home on over 5 acres with 4 bedrooms and 2 full baths. There is a detached garage, a shed/chicken coop and the yard is partially fenced.

The large kitchen has an island and still room for a table or just adjacent is the sun room which has windows on three sides making an inviting dining room. A gas fireplace in the living room adds that cozy touch.
Three bedrooms and a full bath on the side split up and another full bath bedroom and family-room on the side split down.The lower basement has a laundry room, rec room, storage room and utilities.

Buyers and their agents have a responsibility to check data supplied (from CAMA) to their own satisfaction. Information deemed reliable but not guaranteed.Please see HUDhomestore.com or
MMREM.com for more information

11815 Chumrau Loop Missoula MT 59802

Sold-2

11815 Chumrau Loop


Minutes from Missoula this raised ranch has everything. Situated on a full acre with mature pines the home also has access from the frontage road for all your off road toys.

The large main level has a large covered deck in the rear and a smaller deck in the front. Copper accents throughout the home, in the kitchen, around the fireplace and even in the recreation room around the bar.

A big bonus with this home is the very larger master bedroom, master bath and the laundry room. Renovated in 2014 the bath includes both a shower and a tub with an additional heat source with a fan as you step out of either.

With two bedrooms on the main level and two full baths, you could convert the downstairs to a mother-in-law suite or with a hide-a-bed a 3rd bedroom as it has a closet & egress window.

The oversize double garage has lots of storage space and an exterior window which makes it bright over the work bench. There is easy access from the garage to the to the half bath and second laundry room in the lower level, as well as to the full finished basement and the main level.

In ground sprinklers keep the lawn green during spring, summer and fall. And there is a very easy method for winterizing the sprinklers built-in to the service area in the basement.

If you’re looking for an oasis with land and a well built home at an affordable price, just 8 minutes from Missoula – don’t miss this one!