It’s an ideal time to invest in real estate

By Adriana Donofrio Special to Foothills Reader

Sales reports show that real estate investors are snapping up the bank-owned and distressed inventory of single-family homes coming on the market.

With the combination of low prices and historically low interest rates, now is a great time to invest in real estate. But is a real estate investment right for you?

With the economy picking up steam, interest rates are likely to rise in the coming years, and these ideal buying conditions will not last forever.Low interest rates make it easier to run a positive cash flow and lock in an even better one as rents rise.

Before you decide to add real property to your portfolio, consider the pros and cons of investing in real estate. While being an investor has its benefits, it is not without its challenges, so it is important to do your research and be prepared to face any obstacles.

Benefits and risks

The benefits of owning property include the steady income from rents, tax deductions and the appreciation of property value in the long run. In a low-inflation environment, there is potential for equity gains in real property because home values rise as inflation rises.

As they always say,real estate is the best hedge against inflation. And who isn’t looking for a tax shelter that also pays the mortgage!

On the other hand, maintenance expenses, vacancies and the occasional bad tenant are eminent risks. Finding qualified professionals to assist with necessary services is a must.

A reliable handyman and sharp property manager can handle most of the issues that will arise, keeping you actively engaged with your investment without headaches from tenants.

Good planning and organization is essential to maintaining and keeping track of all expenditures and property matters, particularly when it is time for your annual tax appointment.

How to get started

First, you will need a minimum of a25 percent down payment, and you should get pre-approved for financing as the criteria for approving non-owner occupant loans can be tough. You can only use a percentage of market rents to offset the mortgage.

A good buy starts with location, which is always of premier importance for future appreciation. Other factors such as proximity to shopping, bus lines, or schools can enhance the rent potential. A good floor plan, property amenities and attractive outdoor areas should also be considerations to attract and keep quality tenants.

With tax time approaching, ask your CPA if areal estate investment would benefit your financial future.

—Adriana Donofrio, Podley Properties, adrianad@podley.com