Investing
In Manhattan Beach Real Estate
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Multi Unit Manhattan Beach Investment Properties
There are
many ways to invest your money, and each has it's own levels of
risk and reward. Among one of the best investments is in real
estate. Whether the investment is in a single family home, or
a 12 unit apartment building, owning real estate has a number
of advantages, and often not the same levels of risk.
As with any
investing, investing in real estate takes a lot of time, education,
and, of course, risk. But the rewards can be the difference between
barely getting by and financial independence.
There are
plenty of benefits in real estate...see also Buying your first
investment property in the South Bay.
Cash
flow
Cash flow is the difference between your income and your expenses
on a piece of property. You can have a positive or negative cash
flow. Obviously, you'll feel a lot better if the cash flow is positive.
My advice on
cash flow is this: Never use all of your positive cash flow for
rapid debt reduction. You will be walking a thin line. By keeping
a strong positive cash flow, you will have more options and space
to maneuver.
Appreciation
Appreciation is the increase in value of a property. There are two
kinds of appreciation. The first is from economic conditions beyond
your control, such as inflation.
The second kind
is market appreciation, which you can control. When you improve
a property (through renovations), you force its value higher. You
can purchase a piece of property in need of repairs and bring it
back up to neighborhood standards or slightly higher; this will
give you a property that is much higher in value. In addition, the
South Bay has long been a very strong real estate and investment
market. The simple truth is that there are only so many homes near
the beach, and the demand is generally high. The market tends to
appreciate more, and is less likely to drop in a down market.
Leverage
Leverage is the ability to borrow a percentage of the value of a
piece of property. Real estate, in comparison to other investments,
offers a very high degree of leverage. In some cases, a couple buying
a single-family home can obtain 95% financing. This allows individuals
to purchase real estate with little, if any, of their own money,
and it is this ability that allows the savvy investor to develop
a real estate portfolio by using the appreciation of one property
as the down payment on another.
Amortization
With leverage, or the use of other people's money, comes a repayment
schedule. Your outstanding balance is reduced with every payment
you make. Part of each payment goes to interest (applied first)
and the rest goes to pay off the principal. The principal reduction
is called amortization -- reducing debt. Hence, amortization can
make you wealthy, slowly and steadily.
Tax
advantages
Owning real estate with the goal of making a profit allows you to
deduct interest payments and other expenses come tax time. But don't
be fooled into buying real estate for the tax advantages; rather,
purchase it because it makes economic sense to do so.
7
Important Questions Every Investor Needs to Ask
Are you effectively managing your investment portfolio to make the
most of its potential?
Here
are 7 good questions to ask:
- How can I
maximize the equity I have gained in recent years and leverage
it into a much greater real estateportfolio with greater cash
flow?
- How can I
reduce my investment risk factors by diversifying my portfolio
should the market adjust?
- How can I
reduce the stress and time I spend managing my properties without
sacrificing income or growth potential?
- How can I
minimize or defer the tax burden for myself and my heirs, and
still grow my asset base?
- How can I
utilize the same strategies employed by large institutional real
estate investment firms?
- Am I holding
Title to my properties in a way to protect me and my estate?
- Am I utilizing
the maximum amount of depreciation?
If you're not sure of the answers, please feel free to call. As
a real estate professional, I am here to provide you and direction
in these areas. In most situations, investment properties amount
to our most important and lucrative investments. Doesn't it make
sense to maximize their growth and potential?
