Even in a real estate market where you can acquire the landmark condo at big discounts, you still need to do your homework! What you comprehend, or don't know, will impact the outcome of the investment. Including if you purchase a property in the wrong area of town and / or inaccurately calculate the rental market, then you may significantly retard the growth of your investment. The proper research will allow you to cut down risk. Take the guesswork out of your decision to invest in properties. This article will not necessarily tell you exactly which Arizona expenditure of money property to purchase; however will highlight 4 key equipment that should be researched when making the buying decision. You will also discover a few tools that will aid you in your analysis.
The earliest component of buying an Arizona investment property is to find out the best location. How would you know this, unless you will be actively working in or studying the Arizona real estate market? Just because you can pick up a single family home for $40, 000 wouldn't mean it is the greatest deal out there. There is a lot of money glowing into the Arizona market from investors located in other parts of your country, as well as other parts of the world. Many of these investors are selecting property because it is cheap, not necessarily because it is in the perfect location.
The September 2010: Repeat Sales Index Article, published monthly by Arizona State University's W. W. Carey School of Business, provides detailed information on hawaii of the Arizona real estate market. This report highlights changes through housing prices by location, which is a great indicator just for potential investors.
June 2009 - June 2010 Differences in Housing Prices by Region
Central +5. 8%
Northeast -5. 1%
Southeast -1. 3%
Northwest +1. 8%
Southwest +4. 2%
Based on the data above, any problem homes located in the Central region (Phoenix) have outperformed other areas of the Valley. Some of the other indicators used in deciding the best Arizona investment property location are foreclosure quotes, median home prices, and pending home sales.
The second component of buying an Arizona investment real estate is to determine property type. Whether it is a single family, townhome, condominium, or multi-family, you need to make sure the property fits on with your overall investment strategy. If you are looking to buy and put for cash flow, then you are looking for the property that can yield a very high monthly rent (a duplex or tri-plex over a condominium or townhome). If you are looking for a fix and flip building, then a single family home with the most resale potential may be the smart choice. Once again, this article is not looking at what you should do, but to explain there is a difference in property type based on your investment expected values.
Let's look at the investment strategy of purchasing a cash flow place. Obviously the goal is to acquire a property at the lowest cost possible producing the highest possible rate of return. The contrast below will show the potential impact that a sure property type could have on your cash flow strategy.
Condominium or Duplex Example
Purchase Price - $50, 000
Each month Rent - $650
Monthly Expense - $270
Regular monthly Cash Flow - $380
ROI - 9. 12%
Purchase Price - $100, 000
Monthly Rent - $1, 150
Monthly Expense - $270
Monthly Cash - $880
ROI - 10. 56%
Based on the earlier mentioned example even though the condominium is half the cost of the particular duplex, it yields a smaller Return on Investment (ROI). It is important that you choose to factor in the monthly expenses associated with each property style. This particular condo had a $200 monthly homeowner connections due (common on condominiums and townhomes), which lessened circulation of our monthly cash flow.
The third component of investing in a profitable Arizona investment property is accurately determining market trends value. This is a MUST and to ensure the best information it's advocated that you contact a real estate professional. If you are not sure what person to contact in the Arizona market, feel free to contact Apparent Vision Investment Group for a recommendation.
This section seriously isn't a guide to completing your own market valuation; however will give you some tools to do your own due diligence and to possibly be knowledgeable of the assessment process. There are many websites (Zillow. com, Cyberhomes. com, etc . ) that will run an electronic valuation for a specific property. In determining the actual worth, these should only be used to give you a ball dog park and do not always take into account all factors that could impact the things the property is really worth.
How is a property's value driven? This is not an exact science, but more of an educated judgment. The true value of a property is what someone will be willing to pay for it. Whether it is an appraiser or other realty professional, the market value is determined by analyzing comparable home revenues in the subject property's locale. Some comparable factors can include; age, lot size, square footage, number of bedrooms as well as bathrooms, and amenities (pool, upgrades, etc . ).
At the conclusion of the day, the market value will have a direct impact on what will you pay for a property. If the value is miscalculated, then you may get to overpaying for a property. This could result in a hit to your thought profit.
The fourth component that should be explored before purchasing Arizona investment property is the rental markets. Whether your intention is to buy and hold or to fix and flip, it is important to know the strength of the local nightly rental market. For those investors looking for a cash flow investment, the quote of return is largely dependent on this component. How much on earth do you charge for rent in this area? How quickly are real estate being rented out? For those primarily looking for a short term take care of and flip investment, do not overlook this component. When there is if you are not able to sell your property as quickly as you received intended? This is your exit strategy.
There are 2 essential factors to research when studying the Arizona rental current market, monthly rents charged and vacancy rates. You may find significant differences in these factors from one location to a different one. For example , the Department of Housing and Urban Development's 2011 Estimated Rent Report shows the estimated regular monthly rent for a 3 Bedroom Property in Phoenix along with a 85021 zip code is $1, 220 whereas typically the estimated monthly rent for a 3 Bedroom Property (also in Phoenix) with a 85022 zip code is $1, 440. These estimates may have a large impact on where the investor purchases their property.
There are a many resources available to you through information on the Arizona rental market. However as with selecting the market value, it is important to consult with a real estate professional or perhaps property management company. If you are not sure who to contact from the Arizona real estate market, please feel free to contact Clear Perception Investment Group to get a recommendation.
It is a great time to purchase California investment property; however it is important to do your homework. Because you are familiar with the key components to purchasing a successful investment decision, it is time to do your research. Learn how Arizona Investment Property through Clear Vision Investment Group can assist you in that research.
Cash flow residence advantages are truly hidden from the general public. Think about it. Perhaps you have had sat down with a financial planner and wondered the reason he has never recommended that you take your money and commit to cash flow properties? I mean really... many of the wealthiest people on this planet have used cash flow property to literally build empires! Trump, Kiyosaki, Hilton, Kroc, and Donald Bren come to mind. But still, how often are you advised to look into it?
While you are will be pondering that question, think about this: cash flow property when compared to "traditional" investments peddled by many "financial planners" may deliver higher returns with less risk and more control to your account, as the investor.
Since many are unfamiliar with the importance of monetary as it relates to any business. Let's start there along with a quick definition:
Cash Flow: Is the amount of cash that an investment and / or business venture creates over a specified period of time. Since cash flow or perhaps cash is the primary driver of a business and gives company owners the freedom to create more products, services, or even pay off dividends to shareholders, most analysts believe cash flow to become company's most highly regarded financial statistic. Organizations and enterprises with big cash flows are almost always takeover targets because buyer knows that the cash can be used to help balance these prices of the purchase deal.
Isn't that interesting... (Note typically the underlined sentence above) But, how does that relate to real estate? Think of it this way; each cash flow property that you personally own can be considered its own "company". That is each cash flow property seems to have income in the form of rent, and expenses in the form of taxes, care, or debt service. So , just like large companies experience income and expenses, you as an cash flow property real estate investor will as well.
So , first and foremost, understand that there is a difference in between investing and speculating. An investor will buy profits, while a speculator will bet on a rise on price or buying low with the hope of selling at some point at a higher price. In the investment property world, investors are known as "flippers". This is a topic for another controversy, yet just know there is a difference.
Now, what are the benefits of knowing how important cash flow can be? And, why do I rather have cash flow property to speculating or "flipping" a property?
Advantages 1: When buying cashflow property, I am creating a returning income stream. So , when I invest my cash in a home that I will in turn rent to a tenant, I am essentially being paid for having put my money at risk. Typically the tenant will pay me to live there which creates the income for the property. Having income from the property presents me a steady stream of cash flowing to me we am free to use.
Contrast that with the scenario in flipping the property. If i put my cash into a building for the purpose of fix and flip, then while the property is parked , vacant, or is under repair, or being billed for sale I am not receiving any cash flow. My hard cash is effectively tied up and not available for me to use until finally I sell the property and I will only benefit only sell for more than I have put into the property. I personally would like not to have to sell a property in this market given the actual conditions as it may take some time. During the time I am holding the property as well as waiting for a sale, that property is costing others money in maintenance, taxes, and advertising.
Advantage 2: Selecting cashflow property creates an asset. What does which means that? It simply means that you now control or own a thing that pays you! The real difference between assets and liabilities is that assets pay you and liabilities need to have payment from you. Your personal residence is not an possession, it is a liability! It requires payment from you in the form of home finance loan. Even if your home is paid for, it requires payment from you comprising taxes, insurance, and upkeep to name a few. In reality your own home is an asset for the bank that owns your property loan, or the state and federal government that collects your property tax burden, and the maintenance man who does your lawn... For you nonetheless, your home is a liability!
Buying cashflow property creates the asset because you put a tenant in the property what person pays you. The rented property throws off cash that you can use or reinvest. Every time you buy a true asset, you can get one step closer to financial freedom and a life regarding liberty.
Think of it this way... If your lifestyle costs you will 5, 000 per month, you only need to have assets which spend you 5, 000 per month to maintain your current standard of living. The reason would you have to work at a job if you have other sources of cash? You wouldn't... That's the beauty of owning cash flow place. It puts you one step closer to freeing your body financially.
Advantage 3: Buying cash flow property creates place a burden on advantages. That's right. And, probably one of the most misunderstood tax added benefits is that of depreciation or "phantom cash" because some call it. Basically, phantom cash (or depreciation) can be taken literally as just that, it is money that will not exist. Depreciation is a government incentive and tax loophole of the rich so they can benefit from real estate to a greater length. The way it works is this... government states that anyone can take the value of a building divide it by twenty-seven. 5 years and deduct that amount from your taxable income every year!
Let's say that I buy a building valued by $100, 000 and I rent it out within $1, 000 a month ($12, 000 a year) website would be allowed to subtract ($100, 000 / 27. 5) which is about $3636 a year from my taxable source of income. Which means I only have to pay taxes on $8364 $($12, 000-$3636) for that year not including the other deductions you get as a result of real estate.