10 Deadly Mistakes Buyers Make When Purchasing a Home

1 Not choosing a real estate agent who is committed to forming a strong business relationship with you:

Making a connection with the right real estate agent is crucial. Choose a professional who is dedicated to meeting your needs before, during and after the sale.

2 Not getting pre-qualified before making an offer on a home:

Prequalifiation will make your life easier. Take the time to speak with bank or mortgage representatives. Their evaluation of your income, financial obligations and other factors will help determine a price range that will fit your budget. This is one of the most important steps on the path to home ownership.

3 Not knowing the total costs involved:

Early in the buying process, ask your real estate agent or mortgage representative for an estimate of closing costs. All expenses including title insurance, homeowners association dues and prepay responsibilities should be considered. Remember to examine your settlement statement prior to closing.

4 Not searching beyond open houses, ads or the Internet:

Many homes listed in magazines or on the Internet have already been sold. Your best course of action is to contact a real estate agent. They have up-to-date information that is unavailable to the general public, and are the best resource to help you find

the home you want.

5 Not considering alternatives for what you think is the perfect home:

Buying a home is a process of elimination, not selection. New properties arrive on the market daily, so be open to all possibilities.

6 Not contemplating long-term needs:

It is important to think ahead. Will the home and the terms of the mortgage suit your needs 3-5 years from now? How about 5-10 years?

7 Not following through on due diligence:

Make a list of any concerns you have relating to the home and the community, such as crime rates, schools, power lines, neighbors and

environmental conditions. Ask the important questions before you make an offer on a home. Be thorough so that you can have confidence in your purchase.

8 Not having a home inspection:

Trying to save money today can end up costing you tomorrow. A qualified home inspector will reveal potential issues that

may affect your purchase decisions.

9 Not examining insurance issues:

Certain problems with the structure, condition or location of a property could affect its insurability or the cost of coverage. Consult an agent early in the buying process to avoid surprises and to choose a policy that best fits your needs.

10 Not purchasing a home warranty:

This is essentially a protection plan that usually lasts one year from the date of sale. It typically covers the repair of a home's major systems and appliances, and can be purchased for a nominal fee with the option to renew annually. Your real estate agent can

help you identify the right home warranty.

Benefits of owning rental properties…

The benefits of owning rental properties are quite extensive and I will list them as best I can:

Rental Income

The first advantage of owning Rental Property is obviously the rental income you receive each month or period you choose. Rental income is considered a type of passive income and rental property is considered a business. This means that rental property follows the tax laws of businesses which means the government doesn't automatically take money from you like they would if you were an employee. The best part about rental income is that it is fixed for inflation. If you get a fixed rate mortgage for 15 or 30 years that payment will never change because it's "fixed". However, your rental income will increase with inflation over the years creating a bigger gap between your expenses and your income. For example, if I have a piece of real estate property that I have to pay $500 a month for and my rent is currently only $525 then I am only making a $25 profit each month. Over time inflation sets in and rent will increase so that perhaps 5 years down the road I could charge $700 a month rent for the exact same apartment but still only pay $500 in expenses.

Phantom Cash - Depreciation

Phantom Cash can be taken literally, it is money that doesn't exist. Phantom Cash is a government incentive and tax loophole of the rich so they can furthermore benefit from real estate. The government states that you can take the value of a building divide it by 27.5 years and deduct that amount from your taxable income every year. Let's say that I buy a building valued at $60,000 and I rent it out at $500 a month ($6000 a year) then I would be allowed to subtract ($60,000 / 27.5)about $2181 a year from my taxable income. Meaning I would only have to pay taxes on $3819 $(6000-$2181) for that year not including the other deductions you get from real estate. There are a variety of tax advantages for real estate which makes it one of the best investment vehicles out there.

Appreciation

Appreciation is something just about everyone is familiar with. Over time your property will generally appreciate in value depending on the area. This is caused by several factors; inflation, cost of supplies, desire to live in certain areas, etc. If you buy a house for $60,000 and it appreciates at 2-4% a year(close to the national average) in 5 years your property would be worth somewhere between $66244-$70191 and all you had to do was own and maintain it for those 5 years. If you pick the right area you could do well with Appreciation. For example, from 2001-2005 in Sierra Vista, Arizona the property values nearly doubled. If you bought a house for $114,000 in 2001 people were easily selling these for up to $200,000 in 2005. The next section is going to talk about how to take advantage of appreciation and equity in your properties without paying taxes on them.

Tax Deferred

There exists a form, called a 1031, which allows you to sell a property with the intent of upgrading to a more expensive property and not having to pay taxes on any of the capital gains you received from the transaction. For example, if you buy a house at $100,000 and you sell it 5 years later at $150,000 then you would be responsible for paying capital gains taxes on the difference $50,000 ($150,000 - $100,000). To get around this you use a 1031 form which allows a third party to hold the money for a period of time until you can put it back into another real estate investment of greater value. This allows you to keep upgrading your rental properties using appreciation without having to pay taxes on it. 
The Home Equity Loan

Other Deductions

Interest on Mortgage

As with being a home owner, interest on a mortgage can also be used as a tax deduction against rental income. Let's use the figures above after the phantom cash deductions were taken out. On a building valued at $60,000 that earns $6,000 a year rental income after phantom deductions we were down to $3819 taxable income. Most fixed mortgages rear load interest, which means you pay mostly interest in the beginning and somewhere around the midway point it balances out and you pay mostly principal after that point. For scenario purposes let's say you have a $48,000(20% or $12,000 down payment) mortgage on that property at 6% interest for 15 years. Your payment on the mortgage would be about $405 dollars a month or about $4860 a year and the schedule would look like this for the first 3 years:

* I = Interest, P = Principal, B = Balance 
* I: $2,824.62 P: $2,036.00 B: $45,964.00 
* I: $2,699.04 P: $2,161.58 B: $43,802.42 
* I: $2,565.72 P: $2,294.90 B: $41,507.53

The first year you would be allowed to deduct another $2842.62 from your remaining $3819 which leaves you with about $977 taxable income. From this remaining money you are also allowed to deduct repairs, loss of money due to tenants not paying rent, property taxes, and possibly a few other things. Even if you were in a 15 percent tax bracket you are talking about having to pay 15% of $977 about $147 in taxes. That's not including property taxes or repairs either. Rental Properties can be virtually a non-taxable form of income when you start out and still give great tax advantages when you are further down the line.

Real Estate Taxes

Paying Children to work (if under 18 no taxes or social security).

Other ordinary and necessary expenses.

Others Paying for your Investment

When you own rental real estate you will have others making the payment and building equity for you.

Avoid 10 Biggest Mistakes of Home Sellers

Wanting to put your home on the market? Watch this video to avoid the 10 biggest mistakes that home sellers make.