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You often hear from real estate agents and investors that owning property is a great investment because it allows one to use leverage. Leverage, if implemented correctly, can make you a lot of money. But, it is important to note, not all leverage is created equal. Lower risk leverage can make anyone wealthy over the long term and will almost always outperform other real estate investments. Types of Leverage The standard leverage types you see in the Greater Los Angeles real estate market are the following: The standardized home loan used by homeowners Hard money loans generally used by flippers Construction loans used by spec developers The Standard Home Mortgage The 30-year fixed loan is the
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The American Dream of owning your own home is still alive and well here in the United States. Most Americans believe owning your home is the surest path to wealth and financial freedom. This might be correct, but is it truly the most efficient and profitable way to grow wealth through real estate? In my opinion, the answer is no. Your home is not a true asset until it is sold. True assets are earning profits or growing in value regardless of your personal circumstances. If you lose your job and cannot work, you may lose your home if you don’t have savings to pay the bills. If you lose your job and cannot work, you
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When most people speak about depreciation and real estate, they talk about the tax benefits. Often, you will hear a new real estate investor or some real estate guru say, “You can earn cash flow tax-free because in real estate there is depreciation!” The problem with this statement is that depreciation is very real and tax benefits are given to allow property owners to consistently invest in aging real property, like a new roof, updated plumbing, or new electrical systems. Depreciation Rules For commercial property, the life and deprecation schedule granted by the IRS is 39 years. Have you ever seen a commercial property that has not been upgraded in 39 years? It is about as
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There is much to debate about off-market deals in present day residential real estate. Over the past 10 years, I have seen the good, the bad, and the ugly. In today’s blog post, I will illustrate my opinions on off-market deals and hopefully give you some good insight.   One: Leave the off-market deals to the professionals “Listen, here’s the thing. If you can’t spot the sucker in your first half hour at the table, then you ARE the sucker.” This famous quote by Mike McDermott (Matt Damon) in the 1998 poker cult-classic, “Rounders,” helps to personify residential off-market deals. The reference is made to describe a newbie poker player (a.k.a. a “fish”) trying to play
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