How To Become a Real Estate Investor, Part II, by?Carrie Benuska,?San Marino Real Estate
The San?Marino Real Estate Report, as seen weekly in the?San Marino Tribune
How to Become a Real Estate Investor, Part II, by Carrie Benuska, San Marino Real Estate
In Part II of my series on how to become a real estate investor, I would like to put my focus on a safe route for making money through investment in residential real estate.? Purchasing a property to be held over a period of time enables an investor to rent out the property for monthly income.? Although it can be hard to turn a profit right after the purchase, especially with a greater Pasadena property, over time this type of investment is a way to build net worth and bring in passive income.
Purchasing a rental property with plans to own it over a long period of time, is a great way to enter the real estate investment world.? As long as the individual can keep up with the monthly expenses and retain tenants, this scheme has limited risk.? As well as earning a monthly income, the owner will most likely experience the benefits of appreciation over the period of ownership.? If at some point the individual needs cash for living expenses or faces unforeseen difficulties, they hopefully will net a tidy sum.? Additionally,?based on the owner?s personal tax situation, the depreciation received from the investment could also have certain tax advantages.
As a middle ground between an immediate flip and long-term ownership of a rental property, an investor could choose to purchase a property, with the goal of turning it over after a short period of time.? With the current tax laws, an individual can purchase a property, own it for at least a year, and then 1031 exchange it for a different property of equal or greater value.? A 1031 exchange allows the owner to postpone paying taxes on any gain made through the transaction.
The challenges with owning rental properties is the work required to maintain the property and the continued need to find and retain well-qualified and trust-worthy tenants. Finding good tenants can be difficult, and renters who do not pay in a timely manner or mis-treat the house are problematic.? Also, as a landlord, if something goes wrong with the house, it is the job of the landlord to repair the issue.? If the property is located a considerable distance from the owner, they might choose to hire a management company to handle the day-to-day affairs.? Finding a good company can be tricky, and this adds to the monthly expenses for the investment.
Teles Properties agent and real estate investor, Kathleen Mahoney, bought her rental property over ten years ago for $225,000.? With a keen eye for emerging neighborhoods, Mahoney chose to purchase a triplex in hipster Echo Park.? When deciding on an appropriate purchase, she looked for a great deal in an area with interesting shopping and dining.? She wanted to quickly turn a profit and believed that a convenient location would draw more potential renters.? In the beginning, she lived in the largest unit and rented out the other two.? As an added benefit, at the time of purchase, all of the units were already leased, which brought her immediate income after the close.
Mahoney believes it is important to provide a good living environment for her renters, so she makes an effort to maintain the units well.? She has had great success finding good tenants and spends little time each month managing the property.? Each unit received a major overhaul during a period that it was unoccupied.? Prior to purchasing the property, the systems had been upgraded, which minimizes major repairs.
Mahoney?s triplex is now worth approximately $700,000 and turns a profit of $1,700 per month.? She plans to hold onto it, with the hopes of turning it over to her young daughter one day.? In addition, she plans to purchase more homes as her cash flow allows.? When asked what her advice would be for someone considering making the jump into real estate investment, she said, ?Just do it!?
Keep in mind that a thorough analysis should be performed prior to purchasing a rental property.? A Realtor can help identify areas and properties that will yield the best income, and an accountant can help pencil out the financial details.
Carrie Benuska,?Teles Properties, 210 S. Orange Grove Blvd., Pasadena
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