Q. My husband wants to buy a small house that we can rent out.
From everything I've seen I don't think we can get enough in rent to cover the mortgage, taxes and insurance. That doesn't sound like a very good investment to me. Is there a way to guarantee that we wouldn't have a negative cash flow?
A. There are no guarantees when it comes to investing. However, most of the investors I've worked with are happy for a negative cash flow, which gives them a tax write off. The real pay-off is an excellent return on their money when they sell.
Even in a slow year Vashon Island real estate appreciates at about 10%. In the last couple of years, of course, it's been far greater. There are those who are making 10% to 20% profit in less that a year. I don't recommend buying with the idea of "flipping" a home which usually means a quick cosmetic fix-up and re-selling it in under a year. Like musical chairs, someone will be caught holding the bag.
What I do recommend is buying a good, sound house that has features that are desirable and holding on to it for three to five years. Then you have long term gain as well as short-term tax benefits. You can up-grade the house a little at a time to enhance it's resale value.
Rents remain low because of low interest rates. Most people who can afford to buy are purchasing their own homes. That means there are fewer renters out there. But if you keep the rent reasonable and spend the effort to keep up the property, you'll attract good renters.
A client recently decided to re-finance a rental property I sold him in 2000. He told me that he was pleasantly surprised to learn that it was worth twice what he'd paid for it! His comment was "you can't get that kind of performance out of an IRA." I agree. Real estate has always been a good investment and a carefully selected, well-managed property will bring you an excellent return.
A. There are no guarantees when it comes to investing. However, most of the investors I've worked with are happy for a negative cash flow, which gives them a tax write off. The real pay-off is an excellent return on their money when they sell.
Even in a slow year Vashon Island real estate appreciates at about 10%. In the last couple of years, of course, it's been far greater. There are those who are making 10% to 20% profit in less that a year. I don't recommend buying with the idea of "flipping" a home which usually means a quick cosmetic fix-up and re-selling it in under a year. Like musical chairs, someone will be caught holding the bag.
What I do recommend is buying a good, sound house that has features that are desirable and holding on to it for three to five years. Then you have long term gain as well as short-term tax benefits. You can up-grade the house a little at a time to enhance it's resale value.
Rents remain low because of low interest rates. Most people who can afford to buy are purchasing their own homes. That means there are fewer renters out there. But if you keep the rent reasonable and spend the effort to keep up the property, you'll attract good renters.
A client recently decided to re-finance a rental property I sold him in 2000. He told me that he was pleasantly surprised to learn that it was worth twice what he'd paid for it! His comment was "you can't get that kind of performance out of an IRA." I agree. Real estate has always been a good investment and a carefully selected, well-managed property will bring you an excellent return.
posted by Emma Amiad at
3:54 PM
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