Lawrence Pereira, president of King Harbor Wealth Management in Redondo Beach, Calif., lives on the West Coast but owns properties on the East Coast. Rental owners need to be familiar with the landlord-tenant laws in their state and locale. So, let's identify the most promising markets for different kinds of investing. Take a rental property that costs $100,000 to buy. Effective Gross Income is the potential gross rental income plus other income minus vacancy and credit costs of an investment property. The operating expense ratio (OER) is defined as a measurement of the cost to operate a piece of property compared to the income brought in by the property. If an investor collects rent from an investment property, the Internal Revenue Service (IRS) requires him to report the rent as income, but the agency also allows him to subtract relevant expenses from this amount. Estimate maintenance costs at 1% of the property value annually. Formed in 2005, Georgia Residential Partners, LLC is a real estate investment company that has bought and sold over 700 homes in the Metro Atlanta area AND maintains an A+ rating with the BBB Georgia Residential Partners - Atlanta Real Estate Investing: Wholesale Investment Properties Mortgage lending discrimination is illegal. However, if this is your first property, that's probably a bad idea. An investment property can be a long-term endeavor or a short-term investment. You typically won't use an investment property for … It's tempting to look for the house that you can get at a bargain and flip into a rental property. Primary property investment: Many aspire to owning a property as it represents security, a legacy and a place to call your own. Real estate is tangible property that's made up of land, and generally includes any structures or resources found on that land. These buildings may be commercially-owned apartment buildings or retail store locations. Unlike stocks, you can't instantly sell real estate if the markets go sour or you need cash. Unlike flipping houses, investors must take the long view, evaluating a city’s growth and demand. The more expensive the home, the greater your ongoing expenses will be. In contrast, if a taxpayer sells his primary residence, he only has to report capital gains in excess of $250,000 if he files individually and $500,000 if he is married and filing jointly. Stocks may offer a 7.5% cash-on-cash return, while bonds may pay 4.5%. Cash flow is lower for the investor, but a 27.9% annual return on the $20,000 investment is much higher than the 9.5% earned by the cash buyer. As someone who says he's not at all handy, he makes it work. Investment properties are not primary residences or second homes, which makes it harder for investors to secure financing. The transfer costs for a … Banks also insist on good credit scores and relatively low loan-to-value ratios before approving a borrower for an investment property mortgage. Investment properties are one example of a real estate … It requires long-term … Commercial: Income-generating properties don't always have to be residential. Investors can … They generate some form of income—dividends, interest, rents, or even royalties—that fall outside the scope of the property owner's regular line of business. Always have a margin of safety.". Is it better to buy with cash or to finance your investment property? Plan to set aside 20% to 30% of your rental income for these types of costs so you have a fund to pay for timely repairs. Other costs include homeowners' insurance, possible homeowners' association fees, property taxes, monthly expenses such as pest control, and landscaping, along with regular maintenance expenses for repairs. 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