When looking at investment properties in Phoenix, you’re always exploring options. In the world of real estate investing, there are almost as many strategies to consider as there are properties out there. Here are a few reasons why a buy and hold strategy can be a successful one.
Every month you receive a rent check from all of your tenants. You then subtract the principal, interest, taxes, insurance, utilities (if applicable), and budget for maintenance/capital expenditures, plus all other expenses. The money left over after subtracting all expenses from your monthly rental income is called cash flow. It is income that you can save/re-invest in your portfolio.
If you have a property that you’re holding long term, there are things you can do to bump up rents and increase value. It could be something very simple like giving the exterior of the property more curb appeal. Ultimately, if the value of your Phoenix property increases due to either improvements or market cycles, that is appreciation.
If you hold onto a property long enough, you’ll be able to take the depreciation that occurs over time. That may not mean much to you now, but come tax time it certainly will. You can depreciate the property, plus depreciate line items. For example, if you put in nice, new appliances when you take the property over, those items have a depreciation schedule. Every year for a period of time their value goes down, which means you get to claim that depreciated value on your taxes. Residential rental properties are depreciated over the course of 27.5 years. Commercial rental properties are depreciated over the course of 39 years. Always be sure to consult a tax professional!
When you find a property you’re interested in purchasing as a long term investment, ask yourself these questions:
- Will it appreciate?
- What is the depreciation rate?
- Will it create cash flow for you?
There are many other successful real estate investing strategies; these are just some of the reasons why buy and hold properties should be given consideration as part of your portfolio. If you’d like to discuss more investment strategies, give us a call at 877-472-4842!
Also Check Out: The True Cost of a Fix and Flip Project in Phoenix