How To Make More Profit With Property For Investment in the US
Choosing your first property for investment is one of the big-ticket items you will make as an investor.
Right next to the most significant life-changing decisions you will make are getting married and having children.
The US real estate is where investors and millennials shop for property for investment, which you can buy online.
For all intent and purposes, property for investment is purchased to earn a passive income (rent payments) and consistent returns.
When you invest in a property, you have a tangible investment asset – something you can see, touch, feel, and walk around in.
On the other hand, stocks, bonds, and mutual funds are paper assets with a cash value and may just as quickly rise or crash with the stock market and lose their value.
This article will discuss how you can capitalize on property purchases for investment in America.
You Can Buy a Home in the U.S. As a Foreigner (Even if You’re Not a U.S. Citizen)
Foreigners, Non-Citizens, and just about anyone outside the United States can take advantage of the investment opportunity to purchase and own commercial or residential property.
There are no criteria, laws or restrictions that prevent any individual from any foreign citizenship from purchasing or owning property in the U.S.
Regardless of citizenship, you don’t have to be an American, a green card holder (a permanent resident card), or even need to be in the United States to buy a property.
You can legally purchase a home with the Title Deed issued in your name online.
Understanding The Value of An Property For Investment
Buying an investment property is not the same as getting your first home or primary residence or a place you use for your regular business.
As an investment, a property requires costs to generate an income.
The income you receive can fall under
- Rental Income
What is Property For Investment?
There are three main classifications for residential properties you own for investment purposes.
Primary Residence or Home
A fundamental principle to note is that you can only have one primary residence, that is, a home that you live in on a full-time basis.
You don’t have to live there all year round, but it is your primary residence or home.
You may or may not rent out your second home when you aren’t using it.
So, you can have multiple second homes that you don’t use as your primary residence.
An investment property
The property you own that you use only for generating rental income or eventual profit on its sale is an investment property.
Typically, you won’t use an investment property for your personal use at all.
With Fix-and-Flip projects for Single Family Homes which you intend to sell quickly for a profit are not an investment property per se.
Property for investment is one you plan to hold to generate income or long-term capital appreciation.
A real estate agent, a mortgage lender, and a tax attorney will have different definitions of an investment property, as the term “investment property” may vary.
Fix-and-Flip properties are treated as inventory as opposed to fixed assets for tax.
The question boils down to the strategy you have in place to buy your first property for investment.
For education firms like Noble Sky International, our foreign investors’ strategy is to acquire real estate in the US to buy cash rather than finance a property (via mortgage payments) as a second home.
Tax Implications Of An Investment Property As A US Citizen
According to the Internal Revenue Service of the United States federal government (IRS) definition of a personal residence or second home for tax, you need to occupy the property for a period of which is greater
- a minimum of 14 days
- 10% of the days the property is rented.
If your property does not reach the minimum days’ stay, it’s an investment property in the IRS’s eyes.
While a personal residence or second home can qualify for the mortgage interest tax deduction, investment properties do not.
Should You Use An LLC For Your US Real Estate Investing?
When you invest in US real estate as a foreigner, you will set up an LLC for your business.
Not only should we place rental properties under an LLC, but each property in a respective portfolio should have its own separate LLC.
Not only will filing as an LLC grant major tax advantages and asset security to investors, but each subsequent LLC will offer another layer of protection.
Investment property owners can take a depreciation deduction on their taxes each year.
How to Invest In Real Estate
There are two different ways you can make money from real estate:
- Appreciated value of the property
- Over time cash flow from rental income.
How to Buy Your First Property For Investment in the U.S.
Investing in real estate requires a fair amount of cash.
It takes money to make money.
While you may have heard of many examples of people who made a fortune with real estate with no money down – this is not the case with US real estate.
Buying a property for investment is a cash business regardless of the type of property or whether you plan to rent or fix and flip (resell it afterwards).
Obtaining an investment property loan or a mortgage can be the trickiest part for a foreigner without residency status.
Generally speaking, whether they are permanent residents with a green card or non-permanent residents with a valid working visa, it is harder for a non-citizen of a foreigner to apply for a U.S. home loan.
Real Estate Investors must be aware of the many risks associated with property investment.
Just like every other business, there are potential profits and possible huge losses.
It doesn’t mean that everyone can earn a fortune by investing in the real estate market.
Before buying your first investment house, you need to have a lot more knowledge, network, and connections.
When you start investing, follow these dos and don’ts.
Be Logical, Not Emotional
Real estate investing is purely a business investment.
It would help if you negotiated logically to get the lowest price possible for a property, the odds will stack up in your favour, and you will earn a higher profit.
The first rule of real estate is to make money on the buy, not when you sell.
The second rule is to stick to single-family homes instead of gunning for a block of commercial buildings if you are a newbie with limited resources.
There are target strategies for distressed properties and other real estate assets.
Due Diligence And Research.
The best answer on what and where to buy lies in deep level proper research before buying your first investment property.
To reach the returns you are expecting, the property you buy must be in a location that attracts a growing population with jobs where families want to rent or buy.
Use a logical and analytical approach based on data, financial factors, and economics rather than emotions to help you purchase the best property.
Leave your likes and dislikes about the property; after all, this is not your home but a rental home that makes you money.
Investment isn’t about emotions; it’s about economics.
Buy Property For Investment Cash
In Asia, we are used to saving up the minimum 20% down payment to buy our first investment property by getting a mortgage for the next 15 to 25 years.
Does this sound familiar to you?
Before you move on to find the best financing for your real estate business – there is a simpler way to make your money work harder instead of you “working harder” for the bank.
The best property for investment is not using the rental amount to pay off your monthly mortgage sum.
You will want a strategy that brings in the cash immediately.
A 15-Year Fixed loan means you need to settle the full loan amount plus interest before owning the property for bank-financed properties.
Investment properties require greater down payments and have strict approval requirements than your traditional buildings.
Keep in mind the expenses needed for home improvements if you are interested in flipping your property for profits before committing your down payment.
Noble Sky International’s strategy is for you to use cash when you buy.
Know Your Numbers – Calculate All Costs, Expenses, and Profits
As a property investor, you need time, knowledge, and skills to track the finances and monitor your business’s profit margin to grow your business.
Learn the tools of the trade to get a heads up on what to do to maximize profits.
Start with the money you have saved up.
If you don’t borrow on your first investment property, you have no mortgage or debts to pay.
Next, calculate the cost to purchase, renovate the house and the operation costs.
If you have an excellent reliable contractor, he can give you a reasonably accurate estimate without breaking the bank with unexpected costs that were not accounted for.
Finally, estimate the listing price and sell your property.
You will get a rough estimate of the profit you stand to make after income tax; in this case, if you have your LLC in place, you will pay corporate taxes.
You can calculate the profit margin to see profitability for a specific period, say two years.
Pro Tip: Sometimes, selling a little below the market value may positively impact your bottom line. Holding on to a property over a long time may cause you to lose maintenance and other utilities.
What Is The Profit Margin?
Before you can dive into determining profit margin, you need to know the percentage of revenue your business keeps after paying for outgoing expenses on top of the cost of repairs.
There are three ways to look at the profit margin for your investment property.
- Net profit margin
- Gross profit margin
- Operating profit margin
All investors want the right profit margin that can make your business more viable.
For example, a 30% profit margin means you have a net income of $0.30 for each sales dollar.
Buy Below Market Value For Your First Investment Property.
There is a saying in property:
‘Money is made when you buy, not when you sell.’
It means that the price you pay for a property determines your profit, whether you spend more money on the house renovation before renting or selling it.
Even if you’re a millionaire, you will want to go for properties in the ‘midrange’ rather than buy a single property for a million dollars.
To kick start your real estate business, the type of investment you would want to consider are single-family homes that don’t cost you more than $150,000.
After all, you will need to spend more money on the renovation before the property can generate any profits.
Since it is your first investment property, it will help you remain in the safe zone by keeping your investment as low as possible.
Hence, you will not risk losing too much on your first property even if you don’t meet the anticipated earnings.
The Key Of Financial Success Is To Be Debt Free – So Start By Paying Off Your Debts.
Spending less and saving more are worthy goals.
However, the key to success is paying down debt.
It would be best if you cleared all of your debts before starting in real estate shouldn’t be carrying debts as your investment portfolio.
- student loans
- medical bills
- credit cards
- auto loans
One of the most costly ways to borrow money is by credit cards, from month to month.
No matter how much profit you make, credit card debts can hit a record high of 18% per annum.
To make sense of your investment profits, you need to immediately settle your credit cards and cut your cards if you can’t curb your shopping.
Debt is a major obstacle to reaching financial goals; it accumulates from that extra something you can’t afford to pay cash BUT put on your credit card to buy a home to retire.
Debt affects people of all ages and backgrounds at different life stages.
Borrowing is easy; banks make it simple with a pre-approved cash loan.
Remember, it’s paying off your debts that’s hard, and everything can snowball from hundreds owed to hundreds of thousands.
Owning a real estate investment business is about knowing the difference between a positive and negative monthly cash flow.
Consider Co-Investment Options And Team Up With Other Investors
Noble Sky International has facilitated the pairing of Investors to work on projects that as mutually beneficial on more expensive single properties or huge assets without bank financing.
Co Investment is the natural evolution of the Investment Option that helps investors in their own LLC and co-joint with other limited partners in pooled funds.
Sometimes an attractive asset is too large for an investor to raise capital alone.
While the co-investment process brings costs down, investors with more significant and small capitals can join the projects as a shareholder.
Investors and managers find it mutually beneficial to work together to finance certain transactions, usually single properties or enormous assets.
Co-investments have helped our clients gain valuable quality properties in a highly competitive real estate market where large fund players gain the lion’s shares.
Choose Your Partners Carefully.
Many investors consider partnering up with their friends when they want to start in the real estate business.
First-time investors need to weigh the implications of a partnership agreement.
Like every other business venture, investing in real estate can go either way.
Getting an experienced partner makes the difference between a profitable business or a loss of income.
You could earn a sizeable amount of money, or it might turn into a catastrophic experience.
Now that you know How to Invest Get Started in Real Estate, you will appreciate that getting a property management company to handle things stateside can be the best decision you make.
If you’ve ever rented a room or a house, you probably don’t dream of being a landlord.
Remember the missing or disappearing landlord and how he had to deal with tenants, pest control oversize bugs, and backed-up toilets.
Many of the best real estate investments don’t require handling a tenant’s emergency call personally past midnight.
You need to hire a Project Manager to do the job.
Everything you need to know to get started as an investor
There are many ways to make money in real estate, ranging from low maintenance to high.
First, you need to determine if you want a regular income or to grow your investment further.
New investors will usually say they want both or the best of both.
Some even ask for a list of the pros and cons of getting a Property For Investment.
Of course, you want the biggest bang for your buck – an exponential growth for your money.
Let’s be realistic; profits are hard to come by.
For entrepreneurs and startups, the profit line ranges from 5 per cent to 20 per cent for a mature, established $10 million-plus business.
How to Buy Real Estate Property For Investment
“Buy land. They’re not making it anymore.” – Mark Twain.
Many of us know that real estate a better investment than the stock market, as many may not take to the roller-coaster stock prices.
Over time, and by doing it right, you can grow your capital, build up a portfolio of valuable investment properties.
Property For Investment is always valuable – you make Capital Gains on top of rental income.
Even if the building is razed to the ground, your investment price is still anchored to the ground – the land hasn’t lost its value.
So, What Holds People Back From Buying Property For Investment?
Investing in real estate is a big commitment that requires two components.
Money and Time.
Both are valuable assets and not interchangeable.
If you have the time, you might not have sufficient money to invest without taking a loan.
If you have the money, you might not have the time to manage your projects – this is easier to solve, you hire a Property Manager.
Your Property Manager screens potential renters, handle tenants, and maintenance of your assets.
It’s time to talk strategy.
What are the different types of investment and real estate investing?
How can you make money in real estate?
Are you looking at long term investments and growing your business?
While there are many types of properties in the US, the best to start with is a single-family home.
Owning a Primary Residence Usually ISN’T Smart
Indeed, many investors view owning a primary residence as a liability.
Whether it’s smart to own your home or rent depends on what your goals are.
Traditionally many people start with saving for a downpayment to buy their first initial investment or primary residence.
Owing appeals most to nesting newlyweds growing a family.
You want the freedom to paint the walls, get new fixtures, and generally decide about our home without consulting a landlord.
Hence the ‘happy wife, happy life’ maxim is true as the happier the wife is in a long-term marriage, the happier the husband.
Sometimes this alone is worth the potential loss of buying over renting.
Owning vs Renting
Some people equate being a tenant and living in a rental property to throwing rent money out the window.
When you finance a home with a mortgage, you pay the loan interest every month and capture a tiny bit of the equity.
Over time, you pay off the loan and own the property, thus recapture the equity.
You can buy discounted property for investment in America with the downpayment of your condominiums’ purchase price in Asia.
You May Lose Money On Your Primary Residence
With every year you own property, your costs of homeownership goes up.
You need to factor in the bank’s interest, property taxes, insurance, cost of maintenance, and all the rest.
Unless those growing costs are offset from a rental income, you will lose money on your homeownership.
If you did not buy at a discount to market and paid the full market price, spent money on rehab and subsequent upgrades – you will lose money.
If you bought your property in a high-growth market, the chances are better than 50/50 that you will gain equity when you sell.
In a nutshell: Your primary residence is a liability, it eats up your investment capital, and most of us have to take on mortgage debt to finance it.
Anything can become an asset, and anything can be a liability.
The key is to have more assets vs liabilities.
When You Buy A Property For Investment At A Discount
Owning is an option.
All of us need a place to live in. If you are a single contract-hire constantly on the move, with no family – just rent your primary home.
Then this property becomes a cash producing asset.
“If you fail to plan, you are planning to fail!” – Benjamin Franklin
You can stay there when you are in your city and rent it out when you don’t need to use your home.
Alternatively, you can rent out a room or keep a room for yourself and rent out the rest of the house.
One way is to put it on short term rental or even as an Airbnb.
If you purchase a single-family home with a garage, you can convert it into a den for yourself.
The strategy is to secure a property for investment at a discount to the market price.
Buy the property home that you can afford and pay it off fast, preferably with cash, not in debt.
The Business Of Getting A US Property For Investment
Everyone needs a place to live.
As a real estate investor, you see beyond being a mere homeowner or property owner.
From a conceptual standpoint, you are both the landlord and the tenant.
As the landlord, you need a good return.
When you rent as a tenant, you will want a low-cost place to live.
How Do You Find The Balance To Harmonise The Landlord-Tenant Dilemma?
The best balance is to leverage your asset and redeploying equity into more income-producing properties with future appreciation.
Instead of using your initial savings as a downpayment for a property, you could use the cash to buy a discounted real estate for sale.
When you rent, consider your rental as mortgage money.
At the most, with a rental, you might get a bad landlord who doesn’t want to fix or repairs things, or you need to relocate every few years to new cities.
Now you have your first property (bought in cash) that you can either Rent out or do a Flip.
The rental property will bring you passive investment income, where the flip will gain you more cash when you sell-off.
The key is to buy something that will cash flow instead of you just living there.
Which Are The Best Property For Investment Deals?
The Biggest Takeaway from this article is this.
You will want to buy the ugliest house on the prettiest street instead of the other way around.
While the real estate mantra may be “location, location, and location,” – buying into the right neighbourhood is often the best deal.
Keep an eye out for signs of neglect or distress when you are on the lookout for good buys.
Physical signs like an unkempt lawn, piled up newspapers, or bulging mailbox are indicators that the house may be vacant.
Look for the property owner, motivated sellers who need to relocate or move to another county or country.
Maybe a divorce happened, or someone died, and the property taxes have not been paid.
What’s my next step?
Suppose you have any questions about Noble Sky International’s Co-Founders or how you can find out more about gaining more knowledge or training. In that case, you can submit your email or telephone no for our Consultants to contact you.