Continued from page 1
It is amazing what a cleanup, a little landscaping and a paint job can do to increase
value of a property. Only a few hundred dollars well spent can result in huge value gains in Orlando Investment Property. Your $110,000 property with a little effort could easily be worth $115,000, $120,000 or more virtually overnight! Do you have to do any of this work yourself? Absolutely not! If you like to do that sort of thing then have at it, but if not, simply hire it done and accept a little lower net gain.
Reason 4: Superior Tax Position: The tax code in
United States is geared to reward Investors who make housing and other property available to
population. When you invest in stocks, you are taxed at some of
highest rates in
tax code. When you invest in Orlando Investment Property, you put yourself in one of
best tax positions in
business world. Remember
wealthy that hold substantial portions of their assets in Orlando Investment Property? Tax advantages are one of
main reasons this is true.
Continuing with
above example, let's say that you have completed your 'deal' with
$10,000 invested with a 90% mortgage to purchase
$100,000 property that appraised for $110,000 (because you 'found a good deal'), which you improved to say, $115,000 by spending another $1000 on cleanup etc. Assume that one year passes and
Orlando Investment Property market grew by 6%, your property would now be worth $122,000. So far, so good right? If you are like most people, you may want to spend some of your hard earned money.
Let's do
numbers. You have a mortgage at current rates that started at $90,000 and after a year worth of payments (the majority of which are tax deductible) you still owe approximately $89,000. However, your property is now worth approximately $122,000. If you were to refinance at 90% once again, you would take out a new mortgage of approximately $110,000. This will leave you with approximately $21,000 in cash in your pocket. Now,
BIG question; do you have to pay tax on that money? Absolutely Not! You have not sold
property or realized a 'capital gain'. You have simply borrowed money from yourself. You are able to do what you wish with that money, free from any tax whatsoever. Obviously, a good strategy might be to purchase two more properties just like your first deal!
Also, we have not taken into account
fact that ALL of your interest payments on this property are tax deductible. In addition, you are also able to depreciate
property itself and all of its contents for additional tax advantages if you choose to do so.
Let's be fair and compare
Orlando Investment Property tax position with
stock scenario. Assume that
$10,000 initial stock investment grew by 10% in
first year, creating a gain of $1000 and you wish to access it. If you draw it out, you will pay from 20-28% (or higher) in capital gains tax in order to have access to this money. This reduces your net gain to $800 (actual 8%) or less, depending on your tax situation. Compare that to Orlando Investment Property and you are beginning to get
picture.
Reason 5: Limit Your Exposure To Risk Risk Management: Do you remember at
top when we said that banks would compete fiercely to loan you money on Orlando Investment Property? The answer to
'why' is very simple. Low Risk. Banks incur little if any risk when loaning money on Orlando Investment Property due to
steady, solid growth rate of
property market, as well as
fact that if you default on your payments they will simply sell
property to somebody else. This is in direct contrast to
volatile stock market, which can vary daily with sharp increases and decreases in value. Furthermore, banks realize that a property isn't going anywhere, whereas many investors know all too well about .com and other types of companies that were there yesterday and gone today.
This is all not to say that Orlando Investment Property markets don't go down from time to time, however
dips are much less dramatic than that which can take place in
stock market, proven out by
banks' willingness to loan money on property.
Reason 6: Protecting your peace of mind. Finally, Now that we understand
value of leverage and risk management we realize that a 6% Orlando Investment Property gain 'beats
pants off' a 10% stock gain in actual return on investment by a wide margin (approximately 50%, not taking into account several factors that can increase this number such as tax advantages, income on property etc.) Owning good, solid Orlando Investment Property allows you to sleep at night, or go on an extended vacation without worrying about your asset column. This is directly opposed to holding a substantial percentage of your assets in stocks.
Lisa Carson http://www.biminibayresortinvestment.com lcarson@biminibayresortinvestment.com

Florida Real Estate Investing Expert