December 03, 2017

Real Estate Investing: Taking a Drink

Investing successfully in real estate can give you the freedom to work fewer hours. Here are some points to ponder if you’re thinking about diving in.
By Greg Kelly
Of all my father’s missed investment opportunities — and he told me there were plenty — was the chance to buy some land and a business in my hometown on the Jersey Shore.

Many years ago, he considered buying a bar and some surrounding property for under $40,000 — a good price. This neighborhood bar was located just one block away from the large home my parents had recently purchased for their growing family.

It might seem peculiar that a medical doctor nearing 40 with a wife and four kids (and another on the way) would buy a bar, but he did have a plan.

His uncle, who had been a very successful liquor salesman in New York City, would manage the bar business and it would later be passed down to my father’s eldest son. In addition to the bar was the liquor license and two small houses nearby.

Greater the pity, my father said he could have easily qualified for a loan. He was a young doctor with a solid, growing income and, more importantly, he had excellent credit.

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Much to his later regret, dad passed on the deal and the location was ultimately bought by a family who also owned a bar in Newark, New Jersey. The business, something of a legend in town, still thrives today.

The whole idea of investing in real estate might appeal to veterinarians who are looking for something different. And it appears that a fair percentage of veterinarians (about 20 percent) want to reduce the number of hours they currently work, according to the 2017 American Veterinary Medical Association Report on the Market for Veterinarians.

Why not use those hours to beef up on real estate investing — for as Mark Twain said: “Buy land, they're not making any more of it.” If you’re thinking about real estate investing, here are some fundamentals to consider:
 
  • Location: Pick the right spot. Absent a crystal ball, it’s the key to real estate investing success. Before assuming the hefty burdens and obligations of a down payment and a mortgage, always do your due diligence. The old standby of buying the worst house on the best street still yields good results.
  • Taxes: Significant tax rewards and advantages are available to real estate investors thanks to the federal government. Real estate tax deductions, depreciation, capital gains, swaps, etc. — there’s a lot making it worthwhile. Always consult an accountant or tax expert to learn what can be done properly.
  • Credit: Most worthwhile real estate investments will require borrowed money. The critical hurdle to winning approval is to have excellent credit. The right FICO score can ensure better deals and loan rates.
  • Return Rule: When first deciding whether a rental property is worth the investment price, a good yardstick is to apply the “1 Percent Rule.” Does the income-producing property yield 1 percent of the price you pay for it every month? This means that for a $100,000 property, the monthly rental income should be $1,000.


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