The JOY of HOME PURCHASE: 

1)  IT IS YOURS!!!!

2)  This is what the American Dream is all about

3)  You have the tax advantages of writing off property taxes and loan interest

4)   A real estate purchase should be looked at as a long-term investment.

     Historically, if you hold a piece of real estate for over 5 years, you should be able to get your dollars-in back out plus some appreciation and be able to cover the costs of selling.  That is in addition to having enjoyed the tax advantages.

5)  “Normal” appreciation in the Valley has run 3-5% a year.   Under 3% is rare.  Over 5%  a year happens occasionally and is especially nice if you have purchased before the start of the rise. 

In considering Renting:

1) It is NOT yours!!!

2) Someone else has the privilege of maintenance

3)  Someone else has the tax write-off benefits

4)  Someone else is accumulating the benefits of long-term dollar appreciation.

5)  If you are going to be living in an area for less than 5 years, you need to “do the math” in order to make a careful decision as to which is better – owning or renting

6)  If you are in a financial position that allows for a cash-flow that will work,  you may want to consider a purchase that can become a future rental.  A purchase-loan for a home you are going to occupy has more favorable terms than the loan for an investment property, but if you move away from the area and want to purchase a home in the new location, will you be able to make the dual payments?

What is involved in servicing a rental property?

Plan your cash flow.  Keep in mind that often the “rent” received does not cover all the monthly expenses.  However, those the monthly expenses plus a dollar amount set by the IRS for “depreciation”, plus property taxes, insurance, and loan interest are all deductions on your taxes.  This may put you in a favorable annual cash flow position. 

If you are going to live near by your rental property, are “handy”, and can manage the 2am plumbing stoppages!!!, maintenance costs will be more limited than if you turn the property over to a property manager.

For the least amount of headache, a good property management company is worth the cost.  Plan about 10% of the monthly rent as the PM fee, plus a “start up” reserve dollar amount for repairs.  It may be well worth the additional dollars to also take out a Home Warranty service policy to cover operating systems and refrigerator-stove.  

When planning a rental purchase, keep in mind that SIMPLE is BEST.  I.e., pool maintenance will be costly.  Lawn service for a grass yard will also be a cost factor.

And for a rental property, the #1 rule of real estate especially applies:  LOCATION-LOCATION-LOCATION!  What do you want your tenant base to be?  Students?  Professionals?  Retirees?

The location should be appropriate for transportation, shopping, schools, etc. of your hoped-for tenants. 

If you are considering a purchase for either a home or an investment property, give me a call to put my experience to work for you!

Results that Count! 

   Liz Pickett, ABR, CRS, GRI

Broker-Associate and Relocation Specialist

Coldwell Banker Residential Brokerage