Capital Gains Or Cash Flow?
Each type has its own advantages and disadvantages. For example, “flipping” properties generates profits fast if done properly. Furthermore, capital gains investors do not have to deal with the landlord/tenant issues that sometimes occur. One disadvantage however, is that flippers are subjected Real Estate Agent Jobs to a thirty five percent capital gains tax due to the quick two or three month transactions. They typically do between four to six (or more) of these deals annually. Investors who actively participate in multiple real estate deals within a twelve month period usually pay more taxes.
Cash flow investors on the other hand, do not have to pay a capital gains tax. The reason is because these investors participation in real estate is considered to be passive. The rent that tenants pay is actually passive income each month. As a result, landlords only have to pay fifteen percent tax-one HUGE advantage! Another advantage is when the property is fully paid off, the landlord will continue to receive passive income month in and month out. One disadvantage however, is that cash flow investing requires patience due to the slow process involved. Furthermore, landlords have to deal with bad tenants from time to time. Late rent payments, property vandalism, and tenants involved in illegal activities on the landlords property are a few examples of bad tenant issues.
Commercial Or Real Estate Commission Agreement Residential?
The second type of real estate investment is commercial. Small and large storage unit facilities, small shopping centers, single unit office buildings, and multi unit office buildings are just a few of the many types of commercial real estate. One advantage of commercial real estate is the larger rent payments or more cash flow each month that comes with it. Another advantage is that you as the landlord are dealing with business owners whose livelihoods rest on staying in business (especially small business owners). In other words, rent payments are almost guaranteed to be on time or at least paid.
On the contrary, one disadvantage is that if the economy is bad (which it is right now), a lot of small businesses will shut down. When this happens, your cash flow will stop also. Another disadvantage is that it is generally much more expensive to invest in commercial property. With this in mind, it is not wise to begin your investing career dealing with commercial real estate. According to experts, it is best to begin investing in residential property first and go from there.
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Capital Gains Or Cash Flow?