Advantages of Investing Where You Reside

As real estate investors, you have the option to invest in properties around the world. After trial and error, you may have learned what type of properties produce the best ROI. Over the years of funding real estate investments, we have learned that some of the most successful real estate investment properties are located near the investor.

Real estate markets can be very different in as little as 10 miles depending on the MSA. Understanding the market in which you invest is important as to create realistic expectations and have an understanding of the potential ROI.

There are many advantages to investing where you reside, including being able to manage the property and the rehab. If you live near the property, you may not need to hire a property management group, which usually costs investors 15% of the property’s monthly rent. Living near the investment property gives you the ability to check in on contractors, track the project, sort out any issues and fix certain things around the investment property including lawn maintenance. Seeing the project and not relying on the contracts word of mouth, creates a better investment and a higher success rate. The contractors have no obligation to the lenders, the borrower does.

Another great advantage of investing near where you reside includes the ability to get involved with various groups in the area, including real estate groups, to network, find resources, and build a professional team.

At ReCasa Financial Group, we require the investor to reside within 60 miles of their investment property. This helps the investor financially as they are able to make sure rehab is on schedule and they will not go over the loan term.

What advantages can you add for living near your investment property?

Credit Scores: Library Fines to Car Rentals

There are many items that can adversely affect your credit score that you are unaware of.  Library fines lower credit scores for individuals.  Here are some other activities that can lower your credit score.

  • Credit ScoreAlthough libraries do not report to credit reporting agencies directly, they do turn to collection agencies for unpaid balances.
  • Storage units will turn unpaid balances over to collection agencies.  Even if items are left in the storage unit and auctioned off, the payment still needs to be paid.
  • Closing certain accounts can lower your credit score.  Yes, we know that closing credit accounts can affect your credit score, but closing any kind of account can as well.  Make sure that after you close any account, you pay any final or recurring bill so that these are not sent to a collection agency.
  • Renting vehicles can be tricky.  Some car rental agencies will run your credit report before lending you a car and/or if you decide to reserve the car with a debit card.  It is a safe bet to use a credit card to reserve the car, even if you want to use the debit card to pay for it, that way they do not run your credit report.

A collection account can lower your credit score by 25-100+ points, and can stay on your credit report for up to 7.5 years from the bill’s due date.  Credit reports and credit scores are tricky so it is important to learn as much as you can.

What items would you add to this list?

Is Refinancing Before Real Estate Investing Helpful?

As real estate investors, refinancing can help lower your total debt ratio and/or get cash out to increase liquidity.  Lowering total debt can help you qualify for more or larger loans, and could improve your overall credit score.  Getting cash out can help with financing additional real estate investments as equity is a good source for down payments.  If refinancing is able to lower debt ratio and get cash out, it is very helpful in the real estate investing process.  Also, down payments and reserves can be acquired by refinancing if there is lendable equity in the primary residence.

Not many people realize it, but refinancing for just 1% can make a large difference depending on your total mortgage amount ($300,000 debt lowered by 1% = $3,000 per year or $250 per month).

Before refinancing, determine how long you plan to live in the home, how long you have been paying on the mortgage, and if your credit is in good standing.

ReCasa Financial Group   614-221-6770
NMLS #9722 OH: MB.803923.000 IN: 08-0038 LB  PA: Licensed by the PA Department of Banking
130 E.  Chestnut Street, Suite 200 Columbus, OH 43215
Michael Troutman  NMLS # 319798  OH LO 037303.000

Tax Deductions for Real Estate Investors

Many expenses for real estate investors are tax deductible.  Many do not know the difference between repairs and improvements, but it is important to know this when it comes to filing your taxes.  Repairs are fixes that keep the home in working condition and can be written off, but improvements, which add value, change a function in the home, or extend the life of the property, cannot.  However, improvements can be deducted over years.

Schedule EThroughout the year, you should save all receipts and other documentation pertaining to the property, and file deductions on Schedule E. You can deduct expenses associated with:

  • obtaining the property mortgage including real estate professional commissions, insurance premiums, and mortgage interest
  • home owner association/ condo dues
  • interest on business credit cards
  • advertising the property
  • cleaning and maintaining the rental
  • legal fees associated with the property
  • state and local taxes, and fees for filing yearly taxes
  • rental property utilities
  • travel expenses associated with the property

The wear and tear of the rental property can be a write-off too.  However, only portions can be deducted over a number of years.  This starts once the property is ready to be rented and should stop when the cost is recovered or you are done renting it, whichever comes first.  This is the trickiest deduction, so it is important to have your CPA or tax expert handle this.

As real estate investors, what other expenses have you written off?

Benefits of a Pre-Approval

Prequal LetterNot only is getting a pre-approval/ prequalification letter beneficial to you so you can determine the loan amount that you will be approved for, but it also demonstrates to brokers and realtors that as an investor, you are able to purchase a property and eager to do so.  They will have a bigger desire to work with you over someone who has not been pre-approved/ pre-qualified.  A pre-approval/ prequalification letter states that you qualify for a particular loan amount by a specific lender.

How has getting a pre-approval/ prequalification letter helped you in your real estate investing?

To get a free pre-approval/ prequalification letter for your next rehab investment property, call ReCasa Financial Group today at 614.221.6770.