Why Property Taxes Are Not a Dominant Factor, But Still Important For Investors

 

There are a lot of factors that investors will take into account when deciding on where to buy a home as an investment to secure their financial future. Which area has a sufficient supply of homes vis-à-vis demand? Which regions are saturated and which regions are more likely to grow, and hence experience an increase in real estate valuations? What are the urban centers that investors are likely to get the best rental income from? Another aspect to keep in mind is property tax, which is something that is a recurring expense for homeowners.

Property tax varies across the country.

According to USA Today, Hawaii has the lowest average property tax rate at just 0.3% of the total property value. The national average is 1.1% of the average home value. Alabama, South Carolina, and several other states also have low property taxes at 1% or less of the home value. So this means that you are paying less to the tax agencies vis-à-vis the value of your home. On the other hand, states such as Texas have much higher rates of property tax, in some cases close to 3% of property value.
While your principal and interest repayment amounts are not going to change, this property tax component is subject to change as valuations rise. It is an expense that investors should keep in mind when choosing where to invest. While it is far from the most important factor, it can be a countervailing aspect to keep in mind, particularly when making a choice between two otherwise equally good options.

Be a smart investor. Here’s how…

A lot of times, I see investors being carried away by trends, celebrity endorsements, and so on. If X celebrity bought property in a particular city or area, suddenly that place becomes attractive and desirable. You know how Elon Musk can make or break the fortunes of cryptocurrencies with just a tweet? Well, people like Musk have the power to sway public opinion in the real estate investment arena as well. Investors, however, would do well to make choices based not on social media chatter and what is ‘trendy’, but on market projections, and likely fiscal outcomes.
Now here’s a likely scenario – Elon Musk was seen doing business or even just grabbing a bite in Austin, and people decided that this is the place to invest in property. This is not the best idea. This is because in the state of Texas property taxes can hover as high as 2.5% to 3% of the property value. It can vary from zone to zone, but it is generally high. In some Dallas suburbs, it can be close to 3%. On the other hand, in neighboring states like Oklahoma property taxes are much lower.
So given high property taxes, some states are not ideal investment options. This is something that we will be discussing more in detail in our next quarterly event – a free online expo where we discuss all the issues relevant for real estate investors. We will have experts in attendance who will offer specialized insight into property tax as well as asset protection, home insurance, and more. Don’t miss it. 
You Don’t Need To Offer More than Asking Price for a Home

When demand outstrips supply, typically, the seller is in a position to quote their price. Also typically there are more people vying for limited goods and services, which means that they are tempted to offer more than the asking price. This is something that investors ask me as well – should they offer more than the asking price? The short answer is no – this is very rarely necessary. I will explain why.

The Remote Control Retirement Riches formula.

I have four words for you: Remote Control Retirement Riches. My team and I have everything in place for investors. Firstly, I suggest that you use the 30-year fixed-rate loan – it is a simply unbeatable tool for creating future financial security if not actual wealth. Secondly, invest in brand new single-family homes in the larger metro areas where couples and families are looking to live. Our team has created networks with all the relevant contacts: brokers, builders, property managers, financers, and other agencies that would be involved in a real estate purchase.
So, even when demand outstrips supply, we are able to negotiate the best prices. This is because we have the sheer force of numbers with us – quite simply we have a far better bargaining position. As an investor, you don’t have to deal with the hassle of negotiating or asking for more inclusions and so on. With our network and contacts, all this is done for you. Your job is the most difficult one – you do nothing!

Why is the scenario a little different right now?

With the pandemic disrupting supply chains, creating labor problems and delays, there was an actual shortage of availability of new homes in the market. Since lumber and other building supplies have also become more expensive, I have seen instances of builders revising the asking price in some cases. Builders have been facing difficult times and they end up having to do this. To be fair they do also offer a refund of the deposit amount to those investors who are unwilling or unable to agree to the higher revised price.
However, in all my 40 years as an investor, I have never or very rarely seen this happen. My team would typically do all of the negotiations and have everything in place for investors. Right now, with interest rates much higher, these phenomena are subsiding considerably. 
If you would like to know more about the Remote Control Retirement Riches formula, drop us a line. We will also be discussing the market situation that we see right now, where demand is higher than supply, and what prudent investors should be doing, in our upcoming expo. You can register for free here for our online property expo which is designed for savvy investors looking to secure their financial future. 

How the Remote Control Retirement Riches Formula Is Ideal For Investors

For first-time investors and property owners, the idea of giving out their property on rent can be an intimidating one. How does one draft a lease or rent agreement? What are the terms that must be included? How does one protect one’s interests as a property owner? What are the loopholes that tenants can take advantage of? What are the local laws and regulations? And if one gets a draft agreement from a friend or from the internet, what does all the legalese even mean? All this can be confusing and a lot of investors have a lot of very worrying questions for me. When they ask me, how do I create a lease, I tell them, you don’t.

This is the job of the property management firm.

These are contractors who manage residential, commercial, or industrial real estate. It is the job of these firms or individuals to manage properties – homes, condos, apartments, etc. They supervise and look after the property, deal with tenants, and help the property owner navigate the whole process. So what does a property management firm do? They not only collect rent but also oversee and manage the day-to-day requirements of managing a property. They help find tenants for your property and then are the liaison point for the tenant – for maintenance issues, repairs, and so on. Basically, they do the heavy lifting so that property owners have a more hands-off approach to all the nitty gritty that comes with being a landlord of any property.
And yes, they help with creating the lease as well. The property manager is there to see that your interests as a property owner are protected and that this is taken care of in the terms of the lease as well. They have local know-how and they are conversant with the local regulations and state laws. Since they work in the local markets they have valuable insight to share with property owners. They can help avoid legal issues, assist in finding a new tenant at the end of a lease, and more. They are basically the local presence managing your property while you could be living all the way across the country.

Remote Control Retirement Riches.

All of this can be very valuable indeed – particularly if you live in San Francisco and own property in Oklahoma that is to be let out to a tenant. This is all a part of our formula; something we call Remote Control Retirement Riches. After you’ve taken the plunge and invested in property, you need to do nothing! As I always say, doing nothing is the toughest job in the world, but that is what you need to do while your property earns you a passive income and appreciates in value over the years.
Legal and other experts will be guests for our next real estate investment event. They will be sharing their insight and guidance about the dos and don'ts of investing and all that goes with it. You are welcome to register for our next event for free.

Timely Rental Property Investments Can Finance Your Kids' College

A lot of our investors seem to think that an expensive college education is and will remain out of reach for them and their kids. I explain why this is not necessarily so. Taking that all-important step to start investing in real estate has been life-changing for thousands of our clients and can be for you as well. Single-family homes, bought with the help of the 30-year fixed-rate loan can indeed be life-changing for you, as I explain in this podcast.

The life-changing investment.

For a lot of people, the idea of putting a kid through Harvard can sound improbable, even completely out of reach. However, if you plan well and in advance, this is very doable. Suppose you're someone that has just been blessed with a baby. If you decide to take action now you can really have that college fund in place when the kid turns 17 or 18.
Say an investor bought a home with a 30-year fixed-rate loan when their kid was about a year old. As the years go by, that loan amount will seem smaller and easier to repay. By the time that kid is ready for college, you could sell or refinance the home and there you have it: your kid’s ticket to a top college education! I have done this myself; financed my son’s education at Stanford with the help of savvy real estate investments I've made.

How many houses do you need to invest in?

So now that you know it can be done, maybe aim a little higher? Do you want a college education for your kid and a Porsche? Now, I am rather fond of making a lame little joke; I would say, to send your kid to Harvard, you buy one house. To send your kid to Harvard and buy a Porsche, buy two houses! People do laugh at that joke, but actually, that isn't even accurate. Just one home could be enough for that fancy car and the college education, as I explain in this video.
Getting aid in the form of FAFSA (Free Application for Federal Student Aid) is actually much more accessible than you may think. A good and knowledgeable expert can help you fill out that form in such a way that you could become eligible for more aid than you previously thought.
If you have more questions about this, we are here to answer them. Reach out to us at icgre.com or better still, sign up for our quarterly event. This time around, we are going to have an expert – this one is from Stanford, by the way – who is going to speak about FAFSA among other things. Registration is free. Don’t miss it!
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