3 Best Tips for Investing In LA Real Estate
If you are planing to invest in Los Angeles real estate market, a property that can sell later for a good price, the following guidelines and tips can help you make an informed decision:
1. Determine Tax Benefits
Government officials want private investors to buy and sell housing for citizens because if they don’t, the state will be responsible for providing it. This results in impressive tax benefits, especially in LA, that you can avail, such as depreciation write-offs. In other words, when you buy a property that covers an entire building, you can write off the depreciation value of the said building as a tax deduction.
You can enjoy this benefit for 27 years in the case of residential properties and almost 40 years in the case of commercial property. Still, consulting with a tax advisor for specific details regarding benefits is advised. Since these investments are seen as a business, you can benefit from other deductions as well, such as for insurance, maintenance charges, and interest on mortgage.
2. Check Your Credit Report
If you are a novice investor, chances are you will need to borrow money to purchase the best real estate in LA. However, no bank will lend you the money if your credit report is questionable or has problems. To prevent this from happening, check the report and resolve issues beforehand, especially mistakes. This measure will also improve your credit.
Keep in mind that banks are not very willing to lend money for properties that will not be used as primary residences since their loans are for properties that are meant to be homes. In other words, if the former is the case, your credit report has to be pristine to convince them that you are reliable enough to be trusted.
3. Use the 1% Rule
If you wish to buy properties to rent out to tenants, determine whether they are worth the price you are willing to pay for them by using the 1% Rule.
It’s simple. According to this rule, a property that is meant to generate income should produce at least 1% of the amount you paid for it each month. So, for example, if you bought a house to rent out for $250,000, then you should expect tenants to pay $250,000 x 1% = $2,500/month. That way, you can get earn back the money you paid for the house sooner rather than later.
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