Real Estate Investing Must Be A Location Sensation

Some real estate investments can be profitable within the first few months. You can “force” appreciation by buying an older home in a desirable neighborhood. By making a few minor updates, the value can increase substantially. There’s a real science behind cosmetic improvements and structural rehab. It’s not for a beginner, but you can learn the art of upgrades that can pay for themselves at the close.

That home can either be sold for a profit, also known as “ flipping”, or it can be held as a rental as a cash cow. Selling the property may give the flipper a nice lump sum of money. But if that profit is treated as income rather than being reinvested, it does not really count toward building a net worth. Remember to always default to your goals. If income is your game then flipping could be a strategy. If building your net worth is your financial goal then holding on to your property is your strategy.

Keep in mind that flipping can be taxed as ordinary income, which means the government could take half your earnings depending on your tax bracket. (Always check in with your accountant to see how the IRS rules affect you.) One of the first priorities in building your financial profile is determining your effective tax bracket. You have to establish your effective tax bracket to gauge your net income. 

If the property is held and rented, the owner has just created a “clone” that will produce income month after month for the life of that asset. And the tax deductions are much more favorable. A good rule of thumb is to know the tax deductions up front, so you can calculate the real estate transaction to determine if it’s a deal.

This press release contains selected content from Kathy Fettke’s Amazon Bestseller Retire Rich with Rentals.