All Forum Posts by: Ana Garcia

@Sean Starkey I say yes, do it. Just make sure the investment property pays for its own expenses its mortgage, and the additional mortgage it will bring to your home after doing the cashout refi.

Good luck!

@Account Closed, I think what you mean is do not invest in a property for appreciation. And I would have to agree. If there is a downturn in the economy just when you need to sell that property because you need the cash, then you are in a bad position. If you invest for cash flow, you have a better chance of survival. 

However, in today's market there are many investors buying even though they are just breaking even. It all depends on the risk level the investor is willing to accept, the investor's age, the market they are in, the strategy they are following, etc. 

Ultimately, real estate increases in value in the long run.

All real estate appreciates in the long run. The goal in real estate investment is definitely to reach the highest return (and cash flow) possible, but a negative cash flowing property may be become profitable and start cash flowing in a matter of a few years, given that rent goes up and expenses remain about the same. 

@Cris Tiannec Yes, you will have to pay taxes in the State of Michigan. You can find more information on the State's website at:

https://www.michigan.gov/taxes/0,4676,7-238-43513-...

@Jesse Houser There are many benefits of real estate including:

- Depreciation expense: Not a real cash-out, yet it reduces your income and, hence, your taxes. You take this deduction year after year, even though your property appraises in value (in the long run)!

- Borrowning/refinancing: You can refinance your appreciated property and take money out to buy more properties. A property can appreciate in as little as a few months.

- 1031 exchange: You can sell your property and buy another one without paying taxes. This process can be repeated over and over (certain rules apply).

- Operating expenses: You can deduct business expenses including miles, memberships, books, home office costs.

- You can use many strategies to make your property gain value and make more money (BRRR strategy, dividing the property, etc.). You can rent all of your property, or part of it, you could do short term rental.

Should I keep going? I am a fan of real estate, what else can I say?

@Ryan Dietrich Congrats on the purchase! Looks like you are using a great strategy to start your real estate business!

@Dustin Awtrey, One piece of advice is to keep one bank account for your project. Remember to use this bank account for business expenses such as meals, car repairs, gas, tolls, business travel, home office expenses, and other items used in your business (i.e., iPad, laptop, etc.). 

@Daria B. The due on sale clause is not common with land trusts because land trusts are not recorded.

@Stephen N. The accounting treatment would be the same. Land trusts are not required to have their own returns. The beneficiaries/owners of the trust report the income and expenses on their taxes based on the ownership % of each. This income would be reported on Sch C, just like single-member LLCs.