The Complete Guide to Buying Investment Property in NYC: https://www.hauseit.com/buying-investment-property-nyc/
Calculate Your Buyer Closing Costs: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/
In this Hauseit tutorial we’ll go over the pros and cons of investing in real estate versus the stock market and the tax benefits of real estate investing. We’ll also challenge some commonly accepted advice such as buying investment property in an LLC.
If you’re thinking of buying an investment property, you may also be interested in estimating your buyer closing costs in NYC using Hauseit’s interactive closing cost calculator available at www.hauseit.com. You can also save money on your purchase by requesting a Hauseit Buyer Closing Credit.
Should I Invest in Real Estate or Stocks?
You’ll also need to consider timing and your expected holding period when deciding between NYC real estate and the stock market. Stocks and bonds have minimal transaction costs, and you can usually exit an investment within the same day compared to six months or more when it comes to selling a property. Even if you’re able to find a buyer, your returns will be crushed by high real estate broker fees and other seller closing costs.
You should also think about lifestyle considerations when it comes to real estate vs stocks. While it’s possible to live anywhere in the world and manage a stock portfolio, you may have to stick around in NYC to maintain your rental property.
The work involved post-closing with rental property can be substantially more. As a landlord, you’ll need to find and screen tenants, manage repairs, address complaints from tenants, maintain books and records and follow all local rules and regulations, such as ensuring that smoke and carbon monoxide detectors are properly installed and proper notices are posted.
Tax Benefits of Buying Investment Property
The best thing about buying investment property in NYC are the tax benefits for landlords. As an investor, you can write off all expenses associated with your investment property against the rental income of the property. That means your property taxes, your common charges or maintenance, your mortgage interest, depreciation and any miscellaneous costs associated with repairing or maintaining your property.
The biggest kicker here is depreciation, which is a non-cash expense. According to the IRS, investors can depreciate a residential rental property fully over 27.5 years. That means you can depreciate just over 3.6% of the property’s cost basis every year.
Buying Rental Property in a LLC
Should you follow the commonly accepted wisdom of buying property in a LLC as an investor? While the benefits are obvious, such as privacy from having your name indexed in public records and limiting your liability to the specific property, it’s important to consider whether the cost and hassle of maintaining an additional LLC is worthwhile.
For starters, most small property investors with a few rental units may find it more economical to simply purchase a personal umbrella insurance policy to provide additional coverage in excess of the insurance provided through their regular home insurance. This provides a similar benefit to the limited liability from a LLC structure and mitigates the amount of additional fees and paperwork associated with having a LLC for each property.
Furthermore, if a tenant decides to sue you, they can always name you in the lawsuit along with the LLC if they’ve discovered your real name.
Save Money with a Hauseit Buyer Closing Credit: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/