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Taxes and Why Investing in Condominiums Beats Investing in Houses
Number 1: The savy future millionaire real-estate investor appreciates savings through depreciation
When thinking of ways to become rich think of tax savings which are of importance to all investors, and especially to all future real estate condo millionaires.
When one buys a $120,000 house and a $70,000 condo, which one provides more depreciation on income taxes assuming there is no land ownership with the condominium and assuming that the land is 60% of the value of the house?
Answer: the condo!
With the house value of $48,000 one can depreciate the property as follows:
$48,000/27.5 years=$1745.45 per year. In 27.5 years this is 27.5 X $1745.45=$48,000
With the condo one depreciates the entire purchase price over the same 27.5 year period:
$70,000/27.5= $2545 per year. This means that over the 27.5 years of owning both properties one will shelter $22,000 more of income from taxes when owning the condominium!
Number 2: A Real Estate Millionaire Listens To Their Condominium Neighbors
If a tenant starts making trouble the landlord will hear about it as the homeowner associations are filled with busybodies who are very snoopy. If the tenant does something out of line the homeowner association will send a MEMO to the landlord.
This is a good thing because it gives the landlord time to do something about the troublesome tenant before it escalates to cause greater trouble. For example, if a tenant that is involved with illegal drug activities, the landlord may have some culpability knowing about it and doing nothing about it.
If the landlord doesn't know about it, then there is such a thing in the law whIch says the landlord "knew or should have known". The future millionaire landlord will not want to be caught in the "should have known" part or they be fined or worse the government can confiscate the property.
Number 3: Capital Costs- Watching Expenses So One Can Afford to Purchase More Condos in the Near Future and Become a Millionaire Condo Investor Quicker!
When it comes to putting on a roof, it's usually cheaper to buy a roof for a condo than to buy a roof for a house.
A roof may cost $6700 for a house compared to a cost of $2500 for a roof on a similar-sized condo is a big difference. Most people are able to come up with $2500 than with $6700.
Number 4: Regular Maintenance
Everyday maintenance is managed by the homeowner association and not delayed.
Gardening and landscaping are expenses and expensive. Sometimes tenants want to garden and landscape a house. Sometimes they say they want to and they don't.
Either way the future millionaire condo landlord has the option of paying a gardener. One landlord had a gardener and was paying that gardener to do the house landscaping, and then one day the landlord visited the house and saw that the gardener was not gardening....at ALL!
The "no-gardening gardener" caused the landlord to have to hire someone to fix things and pay them EXTRA to catch up on the maintenance because now the maintenance on the home was deferred and behind. This unintentional "delayed maintenance" will not happen with the neighborly neighbors of the standard homeowner association. The homeowner association will usually make sure the gardeners garden and the painters paint.
Numbers 5 and 6: Plumbing And Electricity
Now there can be a fair bit of debate about plumbing.
If the plumbing between the walls leaks in a condo guess who replaces it? Most of the time it is the association. It is their job to fix the plumbing. It is the landlord's job is to relay the phone call that the tenant made that the plumbing in the walls was leaking.
Likewise If the septic on a house needs pumping, that $600 is the landlord's bill. If the wiring needs redoing that is the landlord's bill.
Some investors know about electricity; many don't.
One knows electricity has to be done right. Can the landlord shop and research the reputations and prices for contractors? Sure. But many landlords have others things they would rather do or which are more profitable. When one owns a condo one can call the homeowner association and say, "um...this is so and so and my tenant said the lights are out on the garage. Could you please check on that?"
Number 7: Demographics Favor Getting Rich Through Condominiums
---The USA and much of the world has a population of oldsters getting older who need good condominiums located conveniently to transportation and medical facilities.
Condos are also good for students, newly separated people, people who are "between" their professional jobs who are downsized and cannot afford a great big house.
Condominiums are the future. Will they appreciate? Maybe. But that's OK since there is more depreciation with condos than with houses that cost twice as much. It's better for the taxes and it allows the future millionaire investor to save to invest in another condo.
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