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Buying Real Estate: Things to Consider

08/25/2016 09:20AM ● Published by Hood Magazine

By Josh Kattenberg, Real Property Management Express




Its real estate you are investing in something diversified from stocks and bonds. Because your purchase is a physical property typically located in your own neighborhood, you have a lot more control over this investment than over stocks and bonds.  

 
Benefits of real estate vs. stocks

 
Stocks’ profitability comes from going up in value and being sold when it’s up in value. Profit also comes from dividends. This profit is subject to capital gains taxes, so a dollar earned is a dollar minus capital gains tax.

 
Real estate’s profitability, on the other hand, comes from an increase in value, cash flow, principle reduction (when a loan is used), and depreciation (tax benefits). Because of the tax benefits from depreciation, dollars earned from real estate are worth more than dollars earned from your job or the stock market. In addition, the ability to use other people’s money for the purchase of real estate, i.e. a loan, gives a better return on your cash investment.

 
Cautionary note:

Of course, education is essential for success when investing in real estate.
 
Real estate is a commodity. Depending on the market, there can be good and bad times to buy. It’s all about the timing.
 

Bad signs:

  • Houses are selling the same day they are put on the market
  • Houses are selling for a higher price than they’re listed at
  • Low interest rates, as this drive the price up
 

Good signs:

  • Houses are on the market for 6 months; this causes downward pressure on the price
  • High interest rates, as this drives the price down.


Always remember to run your numbers and do your calculations!
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