How to Make Money in South Beach Real Estate Investing

Lower Your Taxes

Tax incentives for real estate investors can often make the difference

in your tax rates. Deductions for rental property can often be used to

offset wage income. Tax breaks can often enable investors to turn a

loss into a profit.

For which items can investors get tax breaks? You could claim

deductions for actual costs you incur for financing, managing and

operating the rental property. This includes mortgage interest

payments, real estate taxes, insurance, maintenance, repairs, property

management fees, travel, advertising, and utilities (assuming the

tenant doesn''t pay them). These expenses can be subtracted from your

adjusted gross income when determining your personal income taxes. Of

course, these deductions cannot exceed the amount of real estate

income you receive. In addition to deductions for operating costs,

you can also receive breaks for depreciation. Buildings naturally

deteriorate over time, and these "losses" can be deducted regardless

of the actual market value of the property. Because depreciation is a

non-cash expense -- you are not actually spending any money -- the

tax code can get a bit tricky. For more information about

depreciation and various tax alternatives, ask your tax advisor about

Section 1031 of the U.S. Tax Code.

Have a Positive Cash Flow

There are two kinds of positive cash flows: pre-tax and after-tax. A

pre-tax positive cash flow occurs when income received is greater than

expenses incurred. This sort of situation is difficult to find, but

they are usually a strong and safe investment. An after-tax positive

cash flow may have expenses that outweigh collected income, but

various tax breaks allow for a positive cash flow. This is more

common, but it is generally not as strong or safe as a pre-tax

positive cash flow.

Regardless of what kind of real estate you choose to invest in, timely

collections from your tenants is absolutely necessary. A positive cash

flow -- whether it is pre-tax or after-tax -- requires rental income.

Be sure to find quality tenants; a thorough credit and employment check

is probably a good idea.

Use Leverage

One of the most important factors in determining a solid investment is

the amount of equity you are purchasing. Equity is the difference

between the actual worth of the property and the balanced owed on the

mortgage.

Benefit from Growing Equity

While investing in real estate is relatively complex, it is often worth

the extra work. When compared to other financial investments, like

bonds or CD's, the return on investment for real estate purchases can

often be greater.

The key to real estate investing is equity. Determine an amount of

equity that you want to achieve. When you reach your goal, it's time to

sell or refinance. Determining the proper amount of equity may require

the assistance of a real estate professional.