Why Real Estate is STILL a Great Investment

Why Real Estate is STILL a Great Investment

How would you like to be able to make up to $500,000 in profit, tax free, every two years for the rest of your life!  Then buy Real Estate!  I know, I know Real Estate’s image kind of went the same way as Mile Cyrus, but at least Real Estate is making a comeback!!   No matter how bad it looks on the surface Real Estate, unlike certain former child stars is still an amazing investment.  Just the tax deductions alone make it a must use investment tool.  Combine those deductions with appreciation and cash flow from investment property and Real Estate is still, one of the best places to invest your hard earned dollars!

Tired of the bank taking and taking?  Then make them put their money to work for you!  For an investor real estate is one of the few things that make doing that easy.   Real estate allows you to make a down payment and leverage your capital, this lets you increase  your overall return on investment many times over.  Leverage means multiplying your gains.  Most often this involves buying more of an asset by using borrowed funds, like a mortgage.  You can also get  Uncle Sam out of your pocket in regards  to your cash flow on investment properties by writing off mortgage interest and depreciation.   In many cases that cash flow would be tax-free.  Wait , did he just say tax-free cash flow?  Yes, the vast majority of investors will not pay taxes on their cash flow!  There is also a good chance, depending on your individual income level that any overage of tax deductions can be used against your other income.  Saving you even more!  Your tax professional will be able to go over these strategies and advise you what is best for you and your individual situation. 

Ok, so you don’t want all the “Headaches” of investing in real  estate.  You just want some nice tax benefits and want to invest some money now and get a great return 20 years from now.  Buy a house!  Simple as that.  Stop renting, stop making someone else all that tax free cash, and get it yourself.  According to the National Association of Realtors  Uncle Sam helps  you in 3 ways when you own your own home.

First  when you buy your home,  the IRS says loan discount points and origination fees are tax deductible to the buyer regardless of who pays them.  So even if the seller pays your closing costs you still get the deduction!

The next and most commonly known deduction is the mortgage interest deduction.  You can deduct interest charged on a loan used to acquire your principal residence in the year that it is paid.  This amounts to most of your monthly payment in the early years of your mortgage.  You can also deduct interest on an additional $100,000 of mortgage debt, which can be used for any purpose.  This is known as the “Home Equity Loan” exception, and it allows you to tap into your home equity for any purpose.  This allows you to shift debt from non -deductible interest such as credit cards to deductible interest from home equity.  Ok, to make the legal folks happy please read and heed the following warning: Please be aware that failure to pay this debt can cause you to lose your home to foreclosure, so this like all things must be used with care.  Again, I know I sound like a broken record, but  talk to you tax professional regarding  all things tax related. 

Last, but definitely the best by far is at the time of sale!  If you have owned and occupied your principal residence for at least 2 of the last 5 years you can earn up to $500,000 if you’re married, $250,000 if your single, on the sale of that house and pay no federal income tax at all!  You can do this as often as every two years for the rest of your life. 

To sum it all up, regardless of the image bashing Real Estate has taken over the last several  years it is still a must have investment.  Whether you are an investor or a homeowner looking for some tax write offs,  real estate is still one of the best ways to make your money grow and, more importantly to keep as much of your hard earned cash as you can. 

If you are interested in getting a current market analysis on your home or investment properties call 760-57LISTD  for a no cost, no strings comprehensive market analysis.

Keller Williams  will be offering a training program to help you take advantage of all of these investing tools.  Please Call 760-951-5242 to register, space is limited!!

Curtis Hurst, Realtor

The Hurst Agency  at Keller Williams Victorville