Page 34 - Flathead Beacon // 4.13.16

KELLEY’S MARKET TRENDS 35 FLOOR SPACE 35 Real Estate
Real Estate Investment Made Easy
NBY BETH BRAVERMAN
O, YOU DON’T HAVE TO BE THE Donald to make good money investing in real estate, but if
you’re not throwing around billions of dollars, don’t expect to blazon your name on any high-rises, either.
Aside from the malls, o ce buildings, or ultraluxe residences preferred by the 1 percent of the 1 percent, there are plenty of opportunities that are more realistic for the rest of us. Here’s a look at some of the most common options for a rookie to invest in real estate, along with the pros and cons of each.
1. Vacation Homes
You might yearn for a cottage near the beach or a cabin in the woods, but fear you can’t a ord it. Well, maybe you can swing it – and make some money at the same time –by renting it out when you’re not there. Sounds good, right?
Pros: Renting out the property can o set the cost of maintaining a second home. Plus, sites such as Airbnb, VRBO, and Vacasa have made it a snap to market your property to would-be vacationers.
Cons: While your vacation home may well turn out to be a moneymaker, you’ll have to shell out a fair amount upfront. Income, down payment, and credit score requirements are often higher when nancing a second home, and you may face higher interest rates as well, so be sure to research that carefully.
And as far as taxes go, it matters how often you rent out the home: less than two weeks per year, the income you earn is tax- free; more often than that, you’ll have to pay income taxes on the rent. But if so, you will be able to write o related expenses.
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Finally, you’ll have to be OK with strangers living in your home and using your stu – and factor in the costs asso- ciated with that.
“Your maintenance costs will include not only the walls of your property, but the maintenance of your personal prop- erty as well,” says Josh Dorkin, founder and CEO of real estate investing site Big- gerPockets.com.
2. In-Law Suites
Some homes come with an in-law suite or detached apartment, but it’s often not a huge investment to build a unit above a garage or convert a nished basement (as law permits) to include its own entrance, bathroom, and kitchen area for a tenant.
Pros: It’s easier to manage the prop- erty because of its proximity to your living space. There’s not much additional main- tenance; you’ve got to mow your own lawn anyway. Plus, you can write o the costs of
maintaining the unit on your taxes. Cons: You’ll be living in very close
quarters with your tenants.
“They’re basically a glori ed room-
mate,” says Jason Hartman, founder of Platinum Properties Investor Network. The rent that you can collect on such units is less than what you’d get on other types of properties. You may run into zoning issues in some communities that don’t allow you to take in tenants, so get a certi cate of occupancy before you set up shop.
3. Single-Family Homes
Whether it’s a condo or a stand-alone house, this type of investment is generally pricier than the options mentioned above. But the rewards may be worth it: Many investors who scooped up single-family homes during the housing bust are mak- ing big pro ts renting them out to folks who’d rather rent than buy but still want
the lifestyle a orded by living in a house. Pros: “There is always demand for single-family homes,” says Bruce Ailion, an Atlanta-based realtor and attorney. Appreciation typically outpaces that of other investment properties, and it’s also easier to nd a buyer (you can sell to either an owner-occupant or an investor) if you decide you no longer want to own
the property.
Cons: In addition to facing a higher
cost to purchase, you’ll be relying on a single revenue stream. This means if your tenant moves out, you have to have enough cash to cover costs until you nd a new tenant. That said, tenants in sin- gle-family homes tend to stay put, so you may not be scrambling as much as you might think.
4. Small Apartment Buildings
If you have a sizable pile of cash to invest, why not pour it into a multifam- ily building? Places with four or fewer units can be purchased with traditional nancing, and they’re a good option for folks who plan on living in one unit and renting out the others.
Pros: Multiple-unit buildings pro- vide multiple revenue streams, so if one apartment goes vacant, you can rely on rent from the others to help o set costs while you look for a new tenant.
Cons: We hope you’re handy with a wrench: Each of the revenue streams is attached to a tenant, so expect double or triple the number of calls about leaky toilets or heating issues. Also, if the ten- ants have issues with each, they’re going to expect you to play mediator. If you’re wondering if you have what it takes, check out “Do You Really Want to Be a Landlord?”
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REALTOR
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406-890-4656 TerryChristopherson.KWRealty.com
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APRIL 13, 2016 // FLATHEADBEACON.COM