Florence, AL Real Estate Investments

Florence, AL Real Estate | Good Investment?

While at a closing last week I was speaking to a couple who was purchasing some Florence, AL real estate to build their home on. Our conversation moved towards accumulating and investing money. They were of the mind of investing their money into CD’s and interest bearing accounts which is a very safe and smart thing to do. But, as of this writing these types of investments pay very poorly with inflation almost exceeding your moneys growth. Upon learning their investment ideals and understanding I suggested that they look into investing into some Florence, AL real estate.

Here’s some of my quick and simple suggestions to Florence, AL real estate investing. These are a few things I’ve learned while acquiring real estate over the past 11 years.

Florence, AL Real Estate | Multifamily Property Strategy

Invest in something that pays a return either now or over the life your Florence, AL real estate. I suggest multifamily property. Why? Because everyone needs a place to live. Plus, your tenant pay your mortgage and pays into your future retirement.

For example. Say you find a $55,000 home near the University of North Alabama, which is prime Florence, AL real estate for those attending college. You can expect to put down about 5% to buy the home. Here’s how it works:

Purchase Price: $ 55,000
Down Payment: $ 2,750
Financed: $ 52,250
Monthly Payment: $ 407
Including Property Tax and Insurance: $ 457
Market Rent: $ 575
In Your Pocket: $ 118

Yearly Gross Income: $ 1,416

This particular scenario allows for a positive cash flow. Having a positive cash flow allows for you to either make:

1. Extra payments to your loan
2. Money for repairs and maintenance
3. Extra spending money

Florence, AL Real Estate | Tenant Builds Equity + Property Appreciation

REMEMBER! This allows the tenant to PAY YOUR MORTGAGE while you BUILD EQUITY in your Florence, AL real estate. ALSO, while the tenant is building the equity in your property, you’re able to recognize appreciation in the properties value.

Let say that in five years your Florence, AL real estate value has appreciated to $60,500. How much equity do you have in the property?

Property Value: $ 60,500
Loan balance: $ 39,000
Equity: $ 21,500

You would have made $21,500 for an investment of only $2,750. Thats a very reasonable return on your Florence, AL real estate investment. Much better than a CD or interest bearing account. PLUS, you get to depreciate the value of the home over a period of time set by the IRS. Here’s how depreciation works in very simplistic terms:

Purchase Price: $55,000
Yearly Depreciation Amount: $ 2,000

Say you net $1,416 at years end, not including your principal payments, this is what your net would look like to the IRS.

Gross Income: $ 1,416
Depreciation: $ 2,000
Net Income: $ - 584 NEGATIVE

Florence, AL Real Estate | When A Loss Can Be A Gain

You may think, why would I want to loose money on my Florence, AL real estate investment? This is only a loss on paper and not in your pocket book.

The IRS looks at and treats a properties depreciation as an expense. Which means this yearly depreciation amount of $2,000 will be written off at the end of the year which means less tax dollars out of your pocket. These dollars can be used to improve your piece of Florence, AL real estate or even begin looking for another property.

This particular scenario does not take into mind the recapture of a properties depreciation upon its sale or raising your rents over the life of the property. That’s a completely different conversation.

This information is based on my opinion and experience only. There are multiple situations and scenarios that can come into play while investing in Florence, AL real estate. Thats why I suggest you consult with a professional who’s done this type of investing before, specifically one who makes his or her living doing it, and even more so, if their expertise in in Florence, AL real estate.



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