More than 30 Years in
Business in San Diego
KOGO News Radio 600

Real Estate Center

Real Estate Center

Most people who own a home understand the value of real estate. Historically, real estate appreciates over time and we are able to deduct the interest on our mortgage thereby reducing income taxes. Tenants pay rent or leases and owners received income and pay down debt creating equity while building wealth.

As financial planners for over 30 years, we see the value of also owning investment real estate. There are basically two ways to own investment real estate; active ownership and passive ownership.

The active owner is generally someone who got started buying single family properties or condos and managing the properties over a long period of time. During those years, the renter paying rents reduced the mortgage of the owner. The owner also received substantial income tax benefits which are reflected on their personal income tax return (Form 1040 Schedule E).  Also there are good times and bad times as the economy has peaks and valleys and interest rates and politicians make changes affecting tax and other benefits. Landlords also have to deal with what we call “The Terrible T’s” (tenants, toilets, trash, turnover, toddlers, teenagers, telephone calls, taxes and sometimes, termites).

The passive owner has investments which involve real estate in the form of Real Estate Investment Trusts (REITS)*; public and private limited partnerships, LLC’s etc. These investments are structured to produce tax-favored income and growth potential to keep up with inflation. Other real estate may be structure for opportunity and growth. There are many variations of real estate and your financial plan will help determine, if and what type, best suits your goals and objectives.

For more, see Real Estate Financial Planning

*Disclosure: A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: Typically no secondary market exists for the security listed above. Potential difficulty discerning between routine interest payments and principal repayment. Redemption price of a REIT may be worth more or less than the original price paid. Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. The offering is made only by the Prospectus.