The way that an individual makes money is by keeping expenses low and income high. The latter is true for any business venture; however, you may be wondering how do you accomplish that in real estate?
To keep expenses low you must be aware of your expenses. Your expenses may be:
- Property taxes
- Insurance
- Maintenance
- Mortgage
Despite the fact that an investor is not eligible for exemptions on income property, there are other ways to decrease the property taxes.
The investor must first understand how property taxes are calculated by the treasurer. Taxes are calculated by multiplying the tax rate by the assessed value. The tax rate consists of:
- Police
- Fire
- Schools
- Library
- Trash removal
- Health
The assessed value in most states including Indiana is some variation of the market value for the property.
The investor can lower his or her property taxes his or her property taxes by examining what the property is assessed at. If the property is assessed for more than the current market will bear or assessed for more than the investor paid, the investor can file an appeal. If successful with the appeal, the investor can save a lot of money.
The investor can save money on insurance, as well. The investor can have a higher deductible. Unlike car insurance, the investor does not pay the deductible first, then the insurance pays instead the deductible is deducted from the claim.
The investor can also reduce his or her replacement cost to 80% of the value; therefore, reducing the premium for the insurance. This tactic is only advised if there will be enough available after the deduction to pay the property's mortgage and/or money available to start on replacement of the property.
Still yet another way the investor can save money on insurance is by changing insurance companies. Yes, shopping around is another way to save money on your premium. Use caution here make sure you are getting similar or better coverage than you had before when changing insurance companies for a lower premium.
The investor also can set aside a certain amount each month from the collected rental amount for maintenance. By setting aside a little of the rent, the investor can be prepare for major maintenance issues.
Another way an investor can save money on maintenance is by having a home warranty. The home warranty covers most major components in the property.
Shopping around is always the best way to save money on a mortgage.
When looking to save money in real estate, research and shop around you will be amazed at your savings.
Comments(0)