Using Real Estate Investments To Produce a Stable Income

If you are looking for the most profitable way to invest your hard-earned money, the real estate investing is the ideal option for you. In fact, it is one of the very few asset classes, which offer a combination of stable income, various levels of tax shelter as well as genuine appreciation. Nevertheless, there is also an option of losing a lot of money should you invest into the wrong asset, seeing how it is a hands-on investment opportunity.

The main idea behind producing a stable income through real estate investments is to begin with properties that are actually producing the cash flow on their own. Even though there are plenty of vacant properties that are available for some great prices, in case you will not be able to lease or rent them, they will rapidly deplete your entire operating capital, leaving you with nothing. Even though you will pay more for actual real estate in most of the cases, you should search for properties that are going to have a positive cash flow in place during the purchase.

Furthermore, keep in mind that some of those assets may present themselves as having the positive cash flow, but in truth they do not. In order to discover the one, which will perform nicely for you and will have a margin for the error, check only its potential or actual rental income for the year and subtract the minimal 5% vacancy factor. Annual expenses will need to include a special management fee of 4-8% in line with the asset’s size. In some states the property taxes are going to be re-assessed on sale and you will need to adjust them up in order to reflect what kind of money you will need to pay in reality. Once you are done with that, you will need to subtract the expenses from the income in order to discover the NOI (Net Operating Income).

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Seeing how leverage is one of the main secrets to investing into the real estate, you are not going to be taking the NOI home. On the contrary – you will be making mortgage payments and will take home all that is left after those. Depending on the type of asset as well as its location, dividing the net cash flow by your down payment will yield a return of four to fifteen percent.

Investing into real estate could prove to be extremely beneficial, should you follow the above mentioned safeguards. In some cases, you will not just earn returns that are higher than those available in bond or stock markets, but you will be able to do so with 50-100 percent tax shelter.

Hence, if you are interested in real estate investments, but do not want to lose your money, feel free to follow all of those recommendations and you will be able to really make the most from your investments. If you need a solution for your real estate or trust deed investing, call our trust deed investing specialists to get a professional free consultation.