The 4 Biggest Mistakes Real Estate Investors Make

Text Box: There are three objectives for your investments: Growth Income Growth and Income Which kind of investor are you? It is important for you to know what the goal of your real estate and investment portfolio is. Income: If your goal is the highest possible income, then most single and multiple family dwellings don’t cut it. In the Bay Area, it is not uncommon to have less than a 3% rent to value (RTV). Income investments should give 6%+. Growth: Why are you receiving rents from income properties just to pay taxes on them before you reinvest? Growth means that you get the money you would have paid in taxes to work for you as well. Growth and Income: Having lots of equity in a property slows your growth from not maximizing your return, but having lots of leverage reduces your income potential. You need an investment strategy that can give income and maximize growth.

Text Box: Paying off your Loans: By paying down a loan, you loose beneficial tax deductions and actually have a worse performing investment. If you have a $100,000 investment that appreciates at 10% per year then it makes $10,000. If you have it paid up, that is truly a 10% return. If you have a $100,000 investment property that you have $20,000 of equity (and thus an $80,000 loan) and it appreciates at 10%, you actually are making a 50% return on your investment of $20,000. Choosing residential properties for income. In the Bay Area, residential properties are usually terrible for income. If income is your goal, you should consider other strategies. Own the residential property for appreciation, not income. Taking income from rentals when you don’t need it. Did you ever consider that the amount you collect in rents every month could be invested without paying taxes on it each year? If you make $30,000 in rents and are in the 33% tax bracket, you only have $20,000 each year to reinvest. By using a strategy of tax deferral you can reinvest the entire $30,000. Holding on to a rental property because of Capital gains TAX FEAR. There are many ways to sell a property without paying capital gains taxes. In addition, some strategies with 1031 exchanges and borrowing funds that can give you a similar result.

Text Box: 1031 Exchange Strategies Downsizing Maximizing income Maximizing Growth TICs (Tenants in Commons) Tax Strategies Comprehensive Financial Planning Estate Planning Strategies* Charitable Trust Strategies* Retirement Planning Tax Advantaged Investments Portfolio Analysis Portfolio Management Real Estate Portfolio Review and Analysis

This is for illustration purposes only. Strategies may not be appropriate for everyone. Your results may vary. Registered Representative offering Securities through FFP Securities, Inc. – Member NASD/SIPC Registered Investment Advisory Representative offering services through First Advisors, Inc. Advanced Equities Companies CA License # 0B96613

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