Real-estate investments in the U.S. have become a more attractive type of investment lately for a growing number of Israelis. However, not every one of them is aware that there’s more than one way to milk the real-estate cow. Here’s a short list of all the ways you can take advantage of this channel to make a profit.
1. Cash Flow
Liquid cash income may be the most intuitive way that most of us think of when we’re talking about income from real-estate investments. In the U.S., there are investments termed “buy & hold.” You buy a property, either a house, an office building, or an apartment building, and we “operate” it and rent it out. Rental payments minus expenses creates a steady flow of cash. It’s up to us to either spend or save this ongoing income.
2. Appreciation
Under certain market conditions, especially in stable growth markets, it’s possible to estimate the future value of the property and to resell it at a profit at the right moment. Investors who focus on future appreciation of the property will seek out information about the neighborhood where the property is located, predictions, and trends. Municipal renewal processes or economic growth are both indicators of a good investment. However, sometimes a company that opens its doors, an upscale shopping mall sports and recreation center, can spur growth in property value. However, we have to take into account that trends can also reverse in certain neighborhoods. In Flip investments focusing on appreciationthe investor needs to also consider the costs of selling the property, which could come to 8-10% of its value.
3. Ancillary Income
Certain types of investments are actually a not-insignificant income source which can come in primarily through “others.” For example, in apartment buildings in the U.S., it’s quite common for the owner to provide coin-operated washing machines. Parking services or soft-drink machines, or even placing signage could also constitute an additional source of income.
In addition to the combined income from these three sources, there are also other ways to milk your real-estate investment. In many cases, you can leverage the value of the property against a mortgage in order to invest in further properties. In other words, you can mortgage the first property or receiving a line of credit against it. Of course, we always have to take interest into consideration along with the index, as well as changing market conditions, so we can make sure that this leveraging makes sound financial sense. The invisible cost of this type of leveraging is the burden and exposure they place on the credit rating of the investor, even if the leveraging and investment in property are carried out by opening a limited corporation.
Tax Benefits
In certain places, specifically in neighborhoods that are undergoing renewal in city centers, it’s possible to receive tax benefits such as tax payment deferrals or a discount on municipal taxes. Even though these are not considered income sources, ultimately they mean more money and therefore, they shouldn’t be overlooked either.