Purchasing Investment Property – Five Considerations to Make Before You Buy

DuPage County real estate lawyersInvesting in real estate can be a lucrative move for the financially savvy, but for those that fail to do their homework, there is a risk of severe financial loss. Learn how you can be a part of the former group of investors, rather than the latter, by avoiding some of the most common real estate investment pitfalls. You shall also discover how an experienced attorney can help reduce the risk of complications in your next real estate transaction.

How Much Will It Cost? 

Calculating the cost of a property can get a little complex, especially for the novice investor. That is because there is more to cost than the sale price, closing costs, and title fees. There could be zoning problems that need to be corrected before you can rent or sell the property, and distressed properties, which are common in the real estate investment sector, could have more damage than you initially thought. As such, investors are encouraged to perform their due diligence before purchasing an investment property, especially if it needs repairs.

How Will Location Impact Your ROI?

Location is everything, especially when it comes to investment property. Prime locations will typically cost more, but they tend to have a higher return-on-investment (ROI). In contrast, properties that are in sub-prime locations are more affordable, but they may have a lower ROI. Areas that are up-and-coming may have a lower ROI to start with, but they may provide you with long-term gains. You could also find yourself dealing with a property that is located in a distressed or declining area, and that might require you to loosen your renting requirements to obtain any sort of gain. In other words, choose your location wisely and always consider how the location could impact your ROI, both immediately and in the long-run.

Who Will Manage Your Property? 

While some investors make great property managers, others lack the skills or temperament to deal with tenants and their potential issues. For example, an investor may have a great deal of compassion, so they may be willing to rent to a tenant based on circumstance, rather than their ability to pay. Sadly, this can place the investor at a serious risk for financial loss – and possibly even financial devastation if they manage several properties in the very same manner. If you fear you cannot manage your property effectively, or you would simply like to ensure you have more time to focus on your portfolio, you may want to consider hiring a property management company instead of handling everything on your own.

Are You Following the “Rules” of Investment?

Investment gurus have one hard and fast rule: never invest in a property that cannot make at least one percent of its cost in the course of a month. In short, if a home is costing you $250,000 to purchase and prepare for tenants, you need to be able to rent it out for at least $2,500 each month. If you cannot make this, or if the pricing is unreasonable for the area, it may be best to find another property. There are exceptions, of course, but investors are discouraged from making them without the guidance and advice of a seasoned professional.

Have You Accounted for the Unexpected?

Seasoned investors know that upfront expenses, such as repairs and closing costs, are sometimes just the beginning. There may be other unexpected expenses, such as taxes and insurance as well. Plan for them and you will be more likely to experience a hefty return on your investment, but fail to do so and you could lose a substantial amount on your next transaction.

Contact Our Skilled Wheaton Real Estate Attorneys 

When you need protection in an investment transaction, Stock, Carlson, Oldfield & McGrath, LLC is the firm to call. Dedicated and experienced, our Wheaton real estate attorneys can assist you in performing your due diligence, and we can help ensure you have not missed any pertinent details. Schedule your personalized consultation to get started. Call 630-665-2500 today.



Selling Your Rental Property? Beware of Capital Gain Taxes

DuPage County real estate lawyersRental property can increase your bottom line, bulk your investment portfolio, and even fund your retirement. Unfortunately, it can also come back to haunt you. Capital tax gains, which are charged by the Internal Revenue Service (IRS), are applied to any asset that you sell for a profit. Learn how to mitigate against this issue with help from the following information.

Offset Gains with Expenditures

If you have an investment portfolio, you can attempt to offset some of the gain from your rental home with expenditures in other investment areas. Alternatively, you may have expenses related to the home itself, which may also be used to cut your tax load. The strategy, known as tax loss harvesting, should be used only under the advisement of a professional.

Use Section 1031 of the Tax Code

Investors who are simply searching for a new property or investment, and not a cash payout, may lower their tax load under Section 1031 of the IRS Tax Code. It does have to include a like-kind investment, but that does not mean you are required to swap out a house for a house. Instead, you can sell a house and trade it out for a condominium or a store. Just make sure the property is not going to be used as your own because that does not count under the exchange rule.

Turn Your Investment into a Home

Selling an investment property and a home you live in are treated as two completely different tax events by the IRS, which is why some investors turn their rental into a primary residence before they sell. Just keep in mind that you must own the home at least five years and live in it as a primary residence for at least two years before you can claim it as your own. Also, because there are some provisions on the deductions you can take, it is encouraged that you speak with a real estate lawyer before making the final decision to live in your rental.

Contact Our DuPage County Real Estate Lawyers

Whether you are planning on buying, selling, or renting a property, contact Stock, Carlson, Oldfield & McGrath, LLC. Dedicated and experienced, our DuPage County real estate lawyers protect your interests and investments. In every situation, we pursue the most favorable outcome. Schedule a personalized consultation to learn more about how we can help with your next real estate transaction. Call 630-665-2500 today.



Illinois Real Estate Group Takes Action on Behalf of Investors

Illinois real estate lawyersInvesting in the state of Illinois’ real estate market is already risky business; the housing market is still lagging from the recession, and now the commercial real estate market is lagging and, perhaps, on the cusp of a crash. Unfortunately, this is not stopping legislatures from trying to impose rent control on both commercial and residential properties. What might this mean for you, the investor, and what actions are being taken to stop the advancement?

Examining the Rent Control Bill

As of right now, rent control is prohibited in the state of Illinois. In other words, property owners and investors can charge what they see fit for their property; generally, this is determined by calculating costs like taxes, the mortgage, maintenance, and insurance. After all that is configured, the investor is only likely to make a small profit. HB 2430, a House Bill that was recently proposed, would lift the prohibition and allow for rent control. In short, it would cut into the little bit of profit that investors currently make from their properties.

Understanding the Impact

As an investor, your goal is to make money off your properties. Of course, you may not make quite as much as everyone thinks you do – but the point is that you do turn a profit. Doing so not only increases your cash flow, but it also provides you with the funds needed to expand your portfolio. On the one hand, this might seem “greedy,” but as most investors know, it is all about being prepared for the next dry spell or market crash.

So what happens if HB 2430 passes? Well, for starters, you might be limited in the amount of rent you can charge. In the best-case scenario, this would decrease your income from a property. In the worst-case scenario, you start losing money on your investment properties. That is why the realtor group is fighting so hard to stop it.

Real Estate Group Campaigning for Investors

Real estate salespersons have jobs that are intrinsically tied to yours, so perhaps they are only looking out for their best interest in their fight against HB 2430. In the grand scheme of things, their motives do not matter. What does matter is the action that you and your fellow investors take against the bill. Not only can this help mitigate the potential risk of rent control, but it can also help you determine what actions can be taken now to mitigate the damage, should the bill pass.

Contact Our DuPage County Real Estate Lawyers

Stock, Carlson, Oldfield & McGrath, LLC has decades of experience working within the real estate industry. Dedicated to your financial future, we can guide you in developing creative solutions and strategies for growing your portfolio. Schedule your consultation with our DuPage County real estate lawyers. Call 630-665-2500.