Investing In South Bay Real Estate

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:

1. How can I maximize the equity I have gained in recent
   years and leverage it into a much greater real estate
   portfolio with greater cash flow?
2. How can I reduce my investment risk factors by diversifying my portfolio should the market adjust?
3. How can I reduce the stress and time I spend managing my properties without sacrificing income or growth potential?
4. How can I minimize or defer the tax burden for myself and my heirs, and still grow my asset base?
5. How can I utilize the same strategies employed by large institutional real estate investment firms?
6. Am I holding Title to my properties in a way to protect me and my estate?
7. 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?