With the baby boomers getting ready for retirement, the economy as good as it's been in years, and interest rates low and affordable, America is in a rage for vacation and investment condos. Las Vegas is a hotspot for luxury condominium construction right now, and Florida is, as always, a top choice for the wealthiest retirees, looking for pleasant year round weather.
Myrtle Beach Condos - A Reasonably Priced Real Estate Investment
Though for many years a hot vacation spot, Myrtle Beach, until recently was a hotel mecca. This is changing drastically, however. As investors flock to the new phenomenon of "preconstruction condos", the small motels in Myrtle Beach and the surrounding areas are quickly being replaced by luxury condominium resorts and investment condo projects on every corner.
Florida prices have gone out of reach in most cases, and those who can't afford a million dollar price tag for vacation property have discovered that they can afford their dream vacation home in Myrtle Beach, SC. With a more temperate climate and mild winters, and somewhat less vulnerable to hurricanes,
the Grand Strand, and even the southern parts of North Carolina are perfect for
beach lovers, retirees, families, and just about everyone.
Investment Strategy
How to Calculate Cash Flow on Investment Rental Property
Because of government rules and regulations, no realtor or real estate agent will be allowed to
forecast or give you any idea about cash flow or ROI when it comes to investment real estate or
rental condos. This can leave you frustrated and wanting more information. We can, however, tell
you the formula to use so you can get a general idea of your investment possibilities.
If you have not purchased the investment property and are trying to decide the potential returns, you can often find out the rental income from another unit of the same size (if it is a condo) or from neighboring properties.
(If it is a home)
What is your taxable income or loss from the investment property?
Taxable Income or loss is the amount of your rental income, less operating expenses, depreciation on the property, and mortgage interest costs.
Depreciation can only be figured on the cost of the building. So with a house, you will need to separate the land cost from the building cost to do this. Depreciation is spread over 27.5 years, and not paid out in
cash each year. Divide the cost of your building by 27.5 years, and that is your depreciation expense.
Figure your Interest Expense for the year on the mortgage and any borrowed funds used to purchase the property.
Operating expenses would include property taxes, insurance, repairs or losses from maintenance problems, and any charges from rental management companies and cleaning costs.
Find your projected rental income if possible, or if you've already passed your first year, use the rental income figures. Subtract the Depreciation, Interest Expense, and Operating Expenses from this amount, and the result is your CASH FLOW for this real estate investment property.
If you have a LOSS, and if you're not a real estate professional, here's how your rental loss could affect your income tax, as of present 2005 tax laws.
If you actively manage the investment real estate and your adjusted gross income does not exceed $100,000, the rental loss (up to a maximum of $25,000) could be deducted from other income such as salary, interest, and dividends. Multiply the rental loss by your federal income tax rate. You will now have avoided a certain amount of income tax, and this can be figured into the cash flow.
New Cash Flow Calculating Process:
Rental Income
Plus: Tax savings
Less: Operating expense
Less: Mortgage payments
Equals= CASH FLOW
Assuming the investment real estate now just about "breaks even" on cash flow, your equity in the property increases each year as the mortgage loan is paid down. Any increase in the value of the property during the years of ownership will increase the owner's ultimate return.
Calculating the cash flow on a real estate rental property investment you're considering will help you decide whether the investment is a good one. You may want to avoid investments with a negative cash flow unless you can come up with additional money to cover operating costs and debt payments.
We want to help make your investment real estate transactions as economical and as efficient
as possible. That's why we believe that the "tax deferred
exchange" is an approach that should be considered by anyone
who owns investment or business related property. Learn how a 1031 Tax Exchange works,
and contact us for more information.
Come to the Source of Investment Condos in the Carolinas
The Myrtle Beach Condo Store is the number one source for Grand Strand condominiums and Myrtle Beach real estate. If you are looking for oceanfront property, a Myrtle Beach condo is just what you need. We can show you the best investment condos in the area.
We are the experts for real estate in Myrtle Beach, North Myrtle Beach, Surfside or Garden City Beaches, and Pawleys Island. Use our contact form and get on our mailing list for the most up-to-date investment condo news and opportunities.
