REAL ESTATE INVESTMENT.                                  ...
                                                                     What Does ‘Investment Real Estate’ Mean?
Basics of Residential Real Estate Investing

• Become aware of the market.

• Approximately 98 percent...
There are, indeed, ways to buy property with very little or no money down. No-money-down dea...
KNOW YOUR GOAL                                                                                             MAKE A PROFIT
TAX INCENTIVES                                                                         REMEMBER...
Most real estate is pur...
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Minnesota Investment Properties


Published on This RE/MAX brochure explains some of the tips and techniques to successfully purchase minneapolis rental and sairnt paul rental properties and well as rental real estate throughout Minnesota.

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Minnesota Investment Properties

  1. 1. SMART INVESTOR THE HOW-TO GUIDE ON MAXIMIZING YOUR REAL ESTATE INVESTMENT. RE/MAX Outstanding Agents. Outstanding Results. No one sells more real estate in Minnesota and Wisconsin than RE/MAX. NORTH Each office independently owned and operated. CENTRAL
  2. 2. REAL ESTATE What Does ‘Investment Real Estate’ Mean? Common examples of investment properties are apartment buildings and rental houses, in which the owners do not live in the residential units, but use them to generate ongoing rental income from tenants. Those who invest in real estate also expect to generate capital gains INVESTING as property values increase over time. The Benefits of Investing in Real Estate 1. Huge Tax Benefits AND THE Properties typically appreciate while the IRS allows you to write your properties off as depreciating. 2. Using “Good Debt” to Build Wealth “Good Debt” is debt that makes you money whereas “bad debt” BENEFITS does not. The benefit of “good debt” is LEVERAGE because you don’t need to have a lot of money to get started—you can start with the equity from your home. 3. A Balanced Investment Portfolio You’ve heard the expression, “Don’t put all your eggs in one basket.” Well, the same applies to investing. By investing in real estate (in addition to other investments such as your IRA, 401K, stocks and bonds) you will have a stronger and more stable investment portfolio. 4. A Personal Retirement Plan When managed correctly, investment properties are a very good potential source of passive income for when you retire. 5. Deferment of Capital Gains Tax When you sell an investment property, if you made more money than you bought it for, that’s called your “Capital Gains” and Uncle Sam will tax you on that gain. However, the government allows you to transfer that gain into another “like kind”property by using a 1031 tax exchange. This allows you to bypass taxation by deferring the financial gain into your next investment. 6. Instant Equity It’s possible to find investment properties that are $5k, $10k, $15k (or more) below market value. When an investor buys properties like this, he or she can instantly use the equity from this for additional buying leverage. 7. Long Term Growth Real estate investing is about buying and holding properties for the future because their value will almost invariably continue to increase. (Source: Alex Anderson For more information on investing in real estate, visit
  3. 3. PREPARING TO INVEST Basics of Residential Real Estate Investing • Become aware of the market. • Approximately 98 percent of the world’s millionaires made their fortunes in real estate property. Find investment properties that are undervalued, and do your research before you make your offer. • The location of a property can drastically affect its market value. Likewise, take note of the features of each property. • Keep track of how long properties are on the market before they sell, and the price that they sell for. • Do not renovate according to your own personal tastes; make your upgrades as market-friendly as possible. Concentrate on the most profitable renovations, such as kitchens and bathrooms. Updated lighting can also be a good investment. And new paint is a given. • Set, and be constantly aware of, your own budget. Know how much you can spend. (Source: basics-of-residential-real-estate- investing.html) LONG TERM APPRECIATION Decade / Appreciation * 1970-1979 / 142% 1980-1989 / 52% 1990-1999 / 45% 2000-2008 / 42% *U.S. Nationally, Source: The National Association of Realtors ( For more information on investing in real estate, visit
  4. 4. BUYING WITH LITTLE OR NO CASH There are, indeed, ways to buy property with very little or no money down. No-money-down deals typically involve a considerable amount of risk and, as such, deserve a great deal of evaluation and care. But they can be put together, and here are just a few methods: Option Contract An option contract is simply a contract between a prospective buyer and seller that provides the buyer with an option to purchase the seller’s property within a given period of time. An option is a unilateral contract, which means that all rights to buy or not buy the property belong to the option purchaser. You don’t want to lose your opportunity to buy the investment property in the meantime, so you use an option contract to gain control of, or tie up, the property. Lease With Option To Buy. A property owner who’s highly motivated to sell may consider leasing his or her investment property to a prospective buyer and giving the buyer an option to buy the property at an agreed-upon date in the future. The purchaser agrees to lease the property for a specified period of time, while preparing financially to purchase it. Contract For Deed Instead of optioning it, the buyer agrees to purchase the property, but typically doesn’t have the necessary cash to do so. The balance of the required down payment will come from the lease payments that the buyer makes to the seller. Distressed Properties A property in substandard condition should always be purchased at a price well below current market value. You can try to convince the owner to sell you the property with no money down and carry back a mortgage for the difference between the existing financing and your agreed-upon price. However, you should expect to incur temporarily higher expenses in order to turn the property back into a profit-generating investment. Many investors have made huge sums of money by specializing in buying distressed properties at below-market prices, fixing them up and selling them at a large profit. Profit Sharing A prospective buyer can offer the seller a share of the profits generated by the property as added incentive to sell the investment with no down payment requirement. The method of determining the profit distribution and the length of time that it’s to be paid are negotiable. (Source: ent-real-estate-with-little-or-no-cash.html) For more information on investing in real estate, visit
  5. 5. KNOW YOUR GOAL MAKE A PROFIT Know Your Time Horizon Real estate is a tangible asset with built in value. It’s an asset that, in As with any other investment, you should have a good idea how long you addition to the ability to generate spendable cash now, can also provide plan to own a rental property before you buy. The longer you plan to own a very effective means of long-term appreciation. Through the years, real the property, the more you’ll probably need to invest in maintenance, estate has proven time and time again to be a solid method of investing repairs and improvements. money, and it is the fundamental source of financial security for countless individuals and families. Develop A Network Experienced landlords find their properties in a variety of ways. Some The basic ways in which to profit from real estate investment: hunt for foreclosures, making friends with city hall clerks or bank employees who know which properties are about to be sold. Some run ads Cash Flow in local newspapers. Others work with real estate agents who keep their Property rental is the primary method of generating cash flow. eyes peeled for possible buys. This, needless to say, is the most direct and immediate return-on- investment, since it consists of “usable money now.” Get Your Finances In Shape The better your credit, and the less credit card and other consumer debt Flipping you have, the better your prospects for getting a decent loan. Lenders Quickly resell property for a tidy profit. Some investors buy properties usually require bigger down payments, higher interest rates and needing extensive rehabilitation; others specialize in properties that generally stronger finances when you’re buying rental property. That’s require only cosmetic repair. because they know people are more likely to default on investment property than they are on their own homes. Also, landlords say it pays Appreciation to have a substantial cash reserve left over after buying a property. Appreciation is typically the largest return-on-investment (or ROI) that This can help pay for unexpected repairs and vacancies. the real estate investor receives. When held over time, properties can experience dramatic increases in value. This is the fundamental Avoid Overpaying attraction of raw land as an investment. As one experienced landlord put it: “You make your profit when you buy a property, not when you sell it.” Some landlords use formulas, such as not Forced Appreciation paying more than six to eight times the rents they expect to make the first Forced Appreciation is the kind of appreciation you can influence, year. Others try to estimate what the property could be worth after needed even control. When you improve a property, you are in effect forcing its repairs and upgrades are made, and they don’t pay more than 70% of value higher. that price, less the cost of those repairs Amortization Cover Your Costs With leverage, or the use of other people’s money, comes a repayment Make sure your rental income will cover your out-of-pocket costs. schedule. Part of each payment goes to interest (applied first) and part That includes the mortgage payment on the property, as well as taxes, of your payment goes to principal. The principal reduction is called insurance, maintenance, repairs and a vacancy rate of around 5%. Amortization. As your debt is being eliminated or reduced your equity is If you can at least break even, you’ll be able to profit from any price being increased. Amortization can make you wealthy. Slow and steady. appreciation as well as from tax breaks available to rental property. You can typically deduct the cost of a repair, such as patching a roof or fixing Return On Taxes a leaking pipe, on your tax return for the year in which the repair is made. There a several sections of the Internal Revenue Code (IRC) you can Replace that roof or those pipes, yes, but such things typically are use to your advantage as you assemble and disassemble your Real considered an improvement, which means the costs can’t be deducted. Estate empire. Instead, they are added to the amount you paid for the property to (Source: determine your tax basis when you sell. (Source: Liz Pullman Weston For more information on investing in real estate, visit
  6. 6. TAX INCENTIVES REMEMBER... Most real estate is purchased, at least in part, because of the tax benefits that • Building substantial wealth in real estate is virtually always accrue for the owner. Ownership of real estate can produce substantial tax savings accomplished over time. that can transform a fair investment into a very good one. Investment real estate can be very effective at doing this. Available deductions for most real estate • Tax records for all real estate are in the public domain. investments include: • Some of the best real estate investment properties are • Mortgage loan interest can be deducted to offset an equal amount of income. located in blue-collar areas. • Property taxes levied against investment real estate and paid to state or local • One of the keys to making money with rental property is to governments can also be deducted from taxable income. avoid changing tenants often. And one of the best ways to keep tenants in place is to charge rents that are slightly less • Insurance premiums for coverage of real estate investments are deductible than market rates. from taxable income. Insurance premiums are not deductible for homeowners. • It is not necessary to buy a property at a low price to make a • Maintenance expenses are fully deductible for a real estate investment. profit if you’re willing and able to wait it out for a while. • Depreciation accounts for the decline in value of an asset over time, including • Experienced real estate investors will often maintain a most real estate. reserve fund for cleanup, rent loss, and rent-up. (Source: • When financing investment property, it’s nearly always better to opt for the longest-term mortgage that you can get your hands on. • It’s important to remember that, when calculating profit or loss, rental expenses must first be offset by rental income. • Real estate taxation can be so complex and involved that it could often qualify as a subject unto itself. (Source: SMART INVESTMENT? Check out the “Cash Flow Analyzer” button on all listings in Minnesota and Wisconsin on! Powered By: For more information on investing in real estate, visit