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Congratulations! You have taken your first steps towards becoming an informed member of the real estate world. I have been in the real estate profession for several years. I hold a real estate brokers license, an avid real estate investor, and a real estate instructor. Throughout those years I have discovered two common denominators. First, being a landlord is not for everyone. Second, real estate investing has made more self-made millionaires than any other industry. An investor need not have a college degree or prior experience. It only takes a little money and a lot of ambition. America’s next self-made millionaire could be you.

Why did I write this book? If you are like me you have purchased every book available about real estate investing. The problem with most books is they are written for investors of large real estate investments such as 100-unit apartment complex’s or commercial property. This book is for the small investor that owns single-family homes or small multi-units.

Whether you already own rental property or you are looking to do so, this book is for you. I hope after you have completely read this book you will know if the life of being a landlord or investing in rental property is for you. I cannot stress enough that knowledge is power. This book will give that knowledge.

Why Owning Real Estate Is The Ultimate Investment

Single-family homes are still the most popular form of residential property in the United States. According to the U. S. Census Bureau, 10 percent of single-family homes are used as rental property. Most are self-managed; however, there is a trend toward hiring professional management companies.

After reading this book, you will have discovered that owning rental property is not for everyone. However, if you are willing to take the plunge, here are several reasons why you should consider this industry. As you will discover, the rewards far out weight the risk.

Little Or No Money To Start

You have heard it before on the late night television advertisements claiming you can achieve financial independence through real estate investing. There is some truth to their claim. The beauty of real estate investing is it bucks the old saying, “it takes big money to make big money.” Big money, no! Some money, yes!

Historically, investors would need a minimum of 20 percent down before they could get a loan for rental property. Today, with money so plentiful, and with good credit an investor may only need as little a 3 percent to get started. Moreover, many sellers are willing to assist real estate investors by financing a portion of the purchase price. This is called seller financing.

If you are a current homeowner, you can obtain a home equity loan or a home equity-line of credit and use the money for the down payments for the purchase of rental properties. When it comes to financing rental properties, the new rule is, there are no rules.

Tax Advantages

Investing in real estate offers many tax advantages for the small investor. You can deduct expenses, depreciation, and current capitol gains rates for real estate investors are favorable. Remember, owning and managing rental property is a business. Therefore, you are allowed to deduct all operating expenses against the rental income. Types of expenses a landlord can deduct are payroll, advertising costs, maintenance, repairs, utilities, management fees, insurance, real estate taxes, mileage, and home office deductions.

Moreover, the Internal Revenue Service (IRS) allows an individual to deduct real estate expenses from other sources of income not related to real estate. To qualify, you must be an active investor and do not exceed the adjusted gross income limits. This is called sheltering other income. Please consult your tax advisor before attempting to utilize these tax advantages.

Extra Monthly Income

Some of the most powerful rags-to-riches stories come from real estate investors. The majority of single-family small real estate investors are middle-class working Americans trying to increase their monthly income. Millions have discovered that investing in real estate can fulfill their income objectives. For many, what started as a part-time in devours blossomed into a rewarding full-time small business. Whether you are looking to increase your income an extra $100 a month or $15,000 a month, owning rental property can help you achieve these goals.

Appreciation

Appreciation represents the increase in value of an asset which in this case is real estate investment property. For example, a property purchased 5-years ago for $50,000 is now valued at $100,000. The property has appreciated $50,000. That is precisely why investing in real estate is a popular investment because it can produce monthly income and property values generally increase.

Essentially, the longer you own a property the more it increases in value. It is true however, some parts of the country experience short-term declines where property values decline. The same is true of the stock market. However, just like the stock market, if your investment strategy is for the long-term, the rewards are endless.

Build Your Retirement Nest Egg

Investing in real estate is one of the best and most secure methods to achieving financial independence. Obviously, the earlier you start investing the better the results. Buying and holding the right investment properties is an excellent way to hedge inflation, take advantage of the tax benefits, and secure your retirement.

The Financial Benefits Of Owning Real Estate

The great thing about owning rental property is you can build incredible wealth by using other people’s money. Usually this requires buyer to put a small down payment on a property and the remaining balance is financed. In essence, you leverage the property.

Real estate investors have the ability to create their own real estate empires with only a small cash investment. For example, you may purchase a rental property for $50,000 with a $5,000 down payment and a $45,000 mortgage from the bank. If the property’s value doubles in 10-years, you have turned your $5,000 investment into $100,000. Future appreciation is a key consideration in an investor’s decision whether or not to purchase a property.

Likewise, owning rental property offers you the opportunity to pay off the mortgage by using your tenant’s rent money. While each month your property is increasing in value, the rent money is paying the expenses, including the mortgage payment. If you own the property long enough, eventually your tenants will pay off the mortgage substantially increasing your monthly cash flow.

Using Existing Retirement Money

Few people are aware that they can invest in real estate using money from a self-directed IRA. A self-directed IRA allows account holders to direct their own investments. An investor can buy, sell, or buy rental properties while deferring all their capitol gains.

The IRS allows an investor to use retirement money to buy any form of real estate including land, condos, commercial property, and rental property. Once the property is sold, all proceeds must go back into the self-directed IRA account.

For rentals, all upgrades and maintenance costs, taxes, insurance, and management fees must be paid from the IRA account. Likewise, any income generated by the rental property must be paid directly to the IRA account. Any rental income earned, can be used to buy other real estate investments or investments such as stocks, bonds, and so on.

When an investor purchases rental property, the custodian of the IRA usually requires the investor to employ a third party property manager. An investor cannot self-manage rental property.

IRA custodians usually require any real estate purchases using IRA funds to be purchased outright with no financing. Likewise, the property must be used as an investment property and not your personal residence.

Custodians do allow an investor to sell the property with seller financing. Incoming monthly payments from the buyer must be deposited into the IRA account.

Finally, an investor can use self-directed IRA funds to purchase a future retirement home. To do this, the investor must use the property as a rental until retirement. Upon retirement, the investor would take a distribution of the property from the IRA.

“A Real Estate Consumers Information Web Site”
(The information contained herein is for informational purpose only and is not in any way legal advice. If you have specific legal question, please contact an attorney.)