In this climate, what are some of the pros and cons of buying single family homes as rental properties?

The Bergen (New Jersey) Record reported in August 2008 about things to consider when deciding about investment property. “Today, sales (of property) are sluggish, prices are down and lending standards are tighter. But experts say real estate can still be a profitable investment, and with prices down this might be a good time to get in - but not for speculators, only for long-term investors with plenty of cash. … Slow real estate sales pump up demand for rental property as potential buying decisions are delayed. Further, incomes are rising more slowly, so a growing number of people will find they can’t afford to buy.”

For the person considering buying investment property, the Record offered these tips:

• Make sure you have enough money saved up to cover a vacancy for several months.
• Hire a qualified inspector before going ahead with the purchase. Structural problems could cost thousands.
• Find out why the owners are selling. Have they maxed out the rent they can charge for the area?
• Don’t overpay. Make sure your rental income will cover the mortgage, taxes and insurance payments.
• Consult with your accountant before buying an investment property to identify any potential tax ramifications.

From the Oct. 4 National Journal: “The Senate voted 74-25 on October 1 to approve a $700 billion financial markets rescue plan, sending it back for a revote in the House … Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., added several major provisions to win votes … including a controversial $100 billion package of tax-cut extensions for businesses and individuals and relief from the alternative minimum tax. …  Adding the tax package to the financial markets bailout was expected to garner additional GOP votes in the House.”

Some of the tax cut “sweeteners” added to the original bill that failed in the House, according to a variety of McClatchy newspapers:

• Raise the exemption level of the alternative minimum tax from the current $66,250/$44,350 for joint or single filers to $69,950/$46,200.
• An extension of the tax credit for alternative energy sources like solar and wind
• Grant tax relief to victims of natural disasters in the Midwest and elsewhere.
• Extend tuition deductions.
• Extend certain deductions for elementary and secondary school teachers.
• Extend an additional standard deduction on real property taxes for non-itemizers.
• Continue tax-free distribution from retirement plans to charities.
• Extend and modify the research tax credit.
• Extend restaurant improvement credits.

The Tax Policy Center, of the Urban Institute and the Brookings Institution, has extensive information about the effect of the presidential candidates’ tax proposals.

Filed under: Economy