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3 Reasons to Own Rental Properties in College Communities – Part 2

Feb 4

Posted by admin in Real Estate

Having personally experienced the pleasure of owning rental properties in a college (university) town, there is a wealth of reasons to locate one’s properties in a community that houses a center of higher education. Listed below are just three of the myriad reasons a rental property owner should add college-town rental properties to their portfolio.

* This article is part two of a two-part series

4.) Good Tenants - Of course there are exceptions to this rule, but most college-town tenants are excellent tenants. They pay their rent (and utilities if required) on time, take care of the property, and are often very courteous to the property owner. From personal experience, pharmacy, legal, and engineering students are often the best tenants because they are constantly bogged-down with complicated homework; leaving them little time or want to party (they are also the most driven to succeed which also indicates a lack of partying).

5.) High Tenant Turnover - Is this author kidding? Since when is high tenant turnover a good thing? Welcome to the world of rental property management in a college town. In this atmosphere, high turnover is a key to one’s rental success. First, every year there is a plentiful supply of new tenants, making it relatively easy to re-rent a property. Having tenants leave every one to three years gives the property manager the opportune time to slightly raise the rent, thus increasing the property’s income. Often, the new tenant doesn’t even realize the rent has been raised.

6.) Inflated Property Values - This benefit is a double-edged sword. Property values in college and university towns are almost always higher the surrounding areas because of the increased demand for property within the town. This is good once one owns the property and begins experiencing the power of equity, but it is before one owns the property that it can be very dangerous. DO NOT over pay for a rental property in a college town. Run some numbers (often a net income evaluation) and make sure that the property will produce income at the given purchase price. If one over pays for a property, they have already destroyed their cash flow potential, so be careful.

College towns are great towns for rental properties, but a few precautions should be taken before jumping in. First, investigate the town to make sure that there are enough tenants to go around and that the school is growing; not shrinking. Secondly, colleges and universities that have excellent graduate programs are more preferable, because they get older students that almost always live OFF campus. After satisfying the above two precautions, one is ready to enter the lucrative niche that this article’s title describes.

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Passive Income, Depreciation, And Tax Implications

Aug 31

Posted by admin in Investing

Daggumit, show me how to lose money faster a young and na’ve Dr. Anderson instructed his accountant. I mean, I just spent $175,000 on an investment property and I can’t write that off this year but rather 27 ” years instead” Fortunately for me, the accountant was patient and understanding.

As many of you know, one of the major benefits of owning real estate is the tax benefit. Specifically, the Government allows you to “pretend” you are losing money on a property when in fact it is really increasing in value. On some of our investments, we were pocketing $1,000′s of dollars per month tax free (well, sort of) and it is all completely legal.

In our preparation for really understanding how the Go Zone can have a major impact on investors, we have to take a step back and understand a little bit about the tax laws related to real estate activities.

Disclaimer: We are not tax attorneys or advisors. The information contained in this article is for educational purposes only. Please consult your appropriate legal/tax advisor.

What Is Depreciation?

Oh, boy now we get to talk about the exciting stuff… taxes, depreciation, “root canals”. As a real estate investor, you DO NOT need to know all the specifics however you DO need to know enough to think through the approximate tax implications of a potential deal. Then, if it looks good to you, you can then double check with your tax advisor.

Depreciation refers to the periodical decline in value of a property due to wear and tear that naturally occurs over time. Since land never wears out, it is not subject to depreciation. Land costs even increase over time. As per the law, a residential property has a depreciation period of 27.5 years and a commercial property has 39 years, both on a straight line basis.

There are multiple methods to compute an asset’s depreciation value. The simplest and most common method used is the straight-line method. The straight line method implies that the depreciation value of a property is equal every year of its useful life. The depreciation value is calculated by dividing the purchase amount of the property by the corresponding depreciation period. So, for example, if you bought property consisting of a house and land with the house costing $200,000, you could “pretend” you lost $200,000/27.5 = $7,272 of value and potentially “write this off” your other income.

Suppose this property actually produced $600 per month positive cash flow and actually APPRECIATED 7% this year. From a simplistic view, we would make $7,200 in income, lose $7,272 in depreciation, and thus have a net loss of $72. Until we sell the property, we can ignore the actual appreciation in value. Suppose the person who owns this property is in the 33% (28% Fed 5% State) tax bracket. Even though they put $7,200 in their pocket, the income tax liability may actually decrease $24; without the depreciation, they would have owed $2,376 in taxes!

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Taking Advantage Of Passive Income

Jun 21

Posted by admin in Wealth Building

?A clear vision, backed by definite plans, gives you a tremendous feeling of confidence and personal power?.-Brian Tracy

Passive income is a hot phrase in the current economic market. The world wide web is full of websites which try to sell you the newest, quickest, and easiest way to make money now! Before you jump head first into any business or investment venture educate yourself about the rewards and the risks. Passive income is recurring profit you receive without having to do much work.

If a passive income program claims you will not have to do any work at all, it\’s probably a scheme to get your money. Unlike earned income, passive income is not related to your time. Most successful investors believe that the difference between the middle class and the rich, is that the rich have created streams of passive income which do not require their direct involvement. Therefore, their time and energy can be spent on yet another business opportunity. It is the closest thing you will ever get to being in two places at the same time.

Do not confuse passive income with residual income. Residual income is money made from doing work once and then collecting \’royalties\’ on that work. Sitcom actors, photographers, and writers receive regular income off the resale of their original work. In addition, multilevel marketing and network marketing are not really passive incomes either. They require a great deal of work and regular attention. Any money made from a business is earned income, not passive.

One of the most popular ways to make passive income is through real estate. If you purchase and own an investment property like a house, commercial building, or apartment you are creating passive income. Savings accounts, CDs, and monkey markets are also ways in which to create a passive income.

You only have to set these business ventures up once, and each month they turn a profit for you. Website banners and Google Adsense are also known as passive income generators. Investing in a business that you do not run, that you receive a profit from, is another instance of passive income.

Passive income is a great way to supplement your current job, and financial investments. Passive investments need to be researched and understood before you decide on them. While passive income does take a bit of work it, can be done from anywhere. Management of your finances can be done from the privacy of your bedroom, lounging at your vacation home, or from your office. If financial freedom is your goal consider passive income streams today.

Visit the Global Investment Institute and signup for our free Investing For Beginners E-Course at www.Global-Investment-Institute.com Investment webmasters or publishers, please feel free to use this article provided this reference is included and all links remain active.

Writen By : Mika Hamilton

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