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Typical Real Estate Investor

Typical real estate investor break even points and some details on it, so we’re going to discuss this. We’re going to talk about if you are investing in real estate or speculating in real estate, there’s a big, big difference with what it is.

And in today’s market, what could you expect if you are an investor, right? What are some basics, some super super basics as we’re talking, like almost even nationwide

And as you guys know this, then sometimes investor, when we hear the word investor, we kind of cringe because, you know, there’s a lot that goes into working with an investor.

But I think if you know these things, then it helps you to be able to prepare and pre- screen. It makes the experience a little bit better.

Yeah, so let’s quickly discuss what these are my terms. Right? Just strictly me. I kind of put some stuff together and how I see it right and investor puts down approximately 20 to 30 percent, meaning they invest with money out of their pocket right on a property. Well, that’s my definition of an investor. If you put down less than that and you’re speculating,

What if you put down cash, what if you pay cash?

Well, if you pay cash, then you’re going to have. Yeah, well, no, you’re you’re truly investing, right? But I’m just talking about a typical investor.

If you’re financing it and you’re kind of doing one of these things and just my basic basic terms kind of going through here. Yeah. Now when you do that, most properties are going to break even at 20 to 30 percent down. If you consider the following items.

Mortgage taxes, insurance at typical rates. Property management by an independent company. Vacancy factor. Realtor. Taking care of it, but probably on some type of property management or contract to execute on. Right. And somebody to repair things and put money back for if there’s a problem.

So if the refrigerator goes out, yeah, that you would be putting some money aside for those types of things on a monthly basis. So you’re operating it as a real business and you’re doing it correctly.

Right? That’s when it would break, even assuming for a 10 percent vacancy factor expenses, all those different items, your rental rate and all of your expenses when it all comes together should be about break even statistically. Over time, it might not for one year. Yeah, but when you look at it for a long period of time, it should work out.

Investment is just that. It’s an investment and it shouldn’t be. I mean, it’s a long term. Anything you invest in is typically not, Hey, I’m going to in one year, expect to turn around and make a profit. But it is. Our market has seen that right where people have invested in properties and turn around. So it’s kind of spoiled us.

But yeah, so that’s just kind of typical. If you start hearing people are looking for numbers that are dramatically different than that, right, then that’s where the problem is. So how do you make money as a real estate investor? Price appreciation of the property.

Number one and or putting more money down to have this income. Maximizing your expenses as it relates to the property for taxation reasons. To write it off with the expenses, but to have the income to bring it in. So there are some numbers that would go along with it from a tax perspective. Yeah, right. So those are a couple of ways that you would do that.

You would beat the numbers by having potentially being better at repairs and managing it yourself as the investor, having higher occupancy rates than others, having higher rental rates because of some reason maybe having furniture in there that you’re also renting. I’ve seen that really is a big, big thing for people. Well, Shana, hit me with some others.

You know, I would pay attention to taxes and investors truly know this, but when you’re you have an investment property, you can only buy your homestead exemption, which will cap that, you know, tax raise and protects you. But on an investment you don’t have the is not your primary residence. So oftentimes we saw in, you know, people who invested 10 years ago all of a sudden saw this huge tax gain, right? Because. The tax increase because on the property taxes.

Yeah. So, you know, we then turned and saw quite a few saying, I’m out, I’m going to sell because that really. Messed up their their numbers.

Well, there you go. So we’re going to have that poll come in right again and we’re going to see who liked that topic. Yes or no? Did you like the topic, right? That’s pretty good.

I just like you. I’m just fine. Well, you’re a sucker. You’re one born every minute. So I think we’ll end that topic.

Episode Links

Mortgage taxes, real estate, Shana

Episode Recorded Live on YouTube 9.9.21

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