younginvestor2013
Recycles dryer sheets
- Joined
- Feb 6, 2013
- Messages
- 226
I've always been interested in having an investment property. I just closed on my own condo this year and prioritized having my "own" residence before pursuing an investment property.
Now that I'm all settled into my "own" condo, I often look on zillow for nearby investment properties.
I feel that many here are generally not big proponents of investment properties due to the time involved and potential headaches as compared to index investing.
However, I've been thinking and I think there are three main advantages and unique dynamics to real estate investing that make it attractive:
1) Cash flow - if your revenues are greater than your expenses, you can pocket a nice monthly "dividend"
2) Price/value appreciation - this is more speculative and "unknown" and would not be realized until the sale of the asset at closing
3) Tax advantages - one can save thousands a year in tax deductions by depreciating the asset over 27.5 (I believe) years.
While I think any 1 of the 3 above don't necessarily make real estate investments largely attractive, it is the combination of the 3 that I am beginning to think make them an attractive investment. Especially since I am 25 and have quite a few years/decades ahead of W2 income for me to earn and therefore have tax deductions against.
I think #1 and #3 are the immediate/short term financial benefits, while #2 is more variable/speculative going into a deal, and might not be realized until far into the future.
I don't see why one wouldn't pursue a deal if you can confidently model out good cash on cash returns (i.e., cash flow) while also taking advantages of the yearly tax deductions against a W2 income, which is part of the overall return of the investment.
Of course, the nature of the deal has to be taken into account. I am largely thinking of large established condo associations where the maintenance and regular upkeep is slim to none (Chicago market).
The other factor is tying up the 20-25% needed for a down payment. With the market spitting out great returns, it might be better to keep it in the market vs an investment property.
Thoughts?
Now that I'm all settled into my "own" condo, I often look on zillow for nearby investment properties.
I feel that many here are generally not big proponents of investment properties due to the time involved and potential headaches as compared to index investing.
However, I've been thinking and I think there are three main advantages and unique dynamics to real estate investing that make it attractive:
1) Cash flow - if your revenues are greater than your expenses, you can pocket a nice monthly "dividend"
2) Price/value appreciation - this is more speculative and "unknown" and would not be realized until the sale of the asset at closing
3) Tax advantages - one can save thousands a year in tax deductions by depreciating the asset over 27.5 (I believe) years.
While I think any 1 of the 3 above don't necessarily make real estate investments largely attractive, it is the combination of the 3 that I am beginning to think make them an attractive investment. Especially since I am 25 and have quite a few years/decades ahead of W2 income for me to earn and therefore have tax deductions against.
I think #1 and #3 are the immediate/short term financial benefits, while #2 is more variable/speculative going into a deal, and might not be realized until far into the future.
I don't see why one wouldn't pursue a deal if you can confidently model out good cash on cash returns (i.e., cash flow) while also taking advantages of the yearly tax deductions against a W2 income, which is part of the overall return of the investment.
Of course, the nature of the deal has to be taken into account. I am largely thinking of large established condo associations where the maintenance and regular upkeep is slim to none (Chicago market).
The other factor is tying up the 20-25% needed for a down payment. With the market spitting out great returns, it might be better to keep it in the market vs an investment property.
Thoughts?