To Purchase or Not to Purchase!
Whether it's your first home or your 5th today is the day to purchase. Whether you are purchasing an owner occupant home or an investment property today is the day to purchase. I don't have to tell you about the great deals on the market, you already know that. Let me tell you some other advantages.
Owner occupied investments.
If you are thinking of purchasing your first home, stop there. You are actually purchasing your first investment. This investment, if treated right, will lead you to your dream home.
Let's say you purchase your first investment for $100,000. You put $10,000 down (10%) of the purchase price. $100,000 is the present value today. The market finishes correcting itself and you sell in 6 years. If your property increases an overall of 8% per annum as it has in the past, your investment is now worth approx. $158,700. You will have approx. $28,600 in mortgage payments and $10,000 cash out, while receiving about $ 20,000 after the sale. Where else can you make $20,000 in 6 years?
Use the equity to purchase your second investment.
Don't sell; why not turn the first investment, into a life time money maker? This is when your money starts paying you. A person always needs shelter. As the population increases, shelter needs increase. Rent the home; let the tenants purchase the home for you. If you can, charge a little more than the house payment and pay down the mortgage faster or create a fun fund.
Soon you will be able to use the equity again to purchase your 3rd investment and so on.
There are many tax benefits to being a "landlord". Talk to your accountant, but here are a few, the heater you would need to replace if you lived there or not. Most maintenance items and the interest you pay on the debt. A property manager, yes property manager, you have better things to do than collect rent and it is a write off. Taxes and the list goes on.
Remember, as the debt is paid down the equity goes up!!! The value increase in the property will offset any maintenance issues usually.
When you do decide to sell your investment property, you may want to invest in a 1031 Exchange. The 1031 allows you exchange or trade your investment for a different one. This is a great way to up your investments and defer payment of taxes.
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