Heading into 2010 and putting 2009 behind us, here are nine arguments for investing in real estate in Santa Monica and on the Los Angeles Westside.
Prices are down. Most types of real estate are selling at substantially lower levels than they have in the past several years. In addition, some excellent deals can often be negotiated with highly-motivated sellers.
Interest rates are near all-time lows. Due to current economic conditions and Federal Reserve actions, monthly payments are much lower than they will be as interest rates inevitably begin to rise.
Real estate has real value and long-term appreciation potential. Unlike many other types of investments, the underlying value of real estate historically shows less volatility and downside risks.
Real estate investments often have cash-flow income.Depending on how highly leveraged the investment is, and on various expenses relating to investment property, positive cash flow can be enjoyed from real estate.
Real estate has depreciation and other tax benefits. Depending on one’s financial circumstances and the advice of one’s tax expert/advisor, various expenses may be used to offset taxable income.
Real estate can be purchased with down payments instead of cash-in-full. Unlike most other investment types, the purchase of real estate can be largely financed, thus requiring less capital to make the initial investment.
Real estate investments can be exchanged at a future time with tax deferrals. The IRS 1031-exchange provisions have been of remarkable value for many decades to real estate investors wishing to upgrade their real estate portfolio for many decades.
Real estate can be an excellent way to transfer wealth from one generation to another, including skipping generations. The purchase of an investment property enables parents and grandparents to “gift” a portion of their estate to the younger generation. It is highly recommended to seek the advice of a tax specialist in understanding the numerous potential possibilities and benefits.
When real estate is inherited and later sold, there can be significant tax advantages to heirs. Although tax counsel must always be consulted, the heir to a property will generally benefit from a “stepped-up basis” which provides that the cost basis of property acquired from a decedent is the fair market value of the property at the date of decedent’s death. This usually results in significant tax savings.
Michael Edlen, an agent with Coldwell Banker in Pacific Palisades, can be reached at 310.230.7373 or Michael@MichaelEdlen.com.