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UP2 Real Estate Investment Financing

Real Estate Investment Financing

Investors with excellent credit scores and reliable sources of income can acquire favorable real estate investments with little or no money down at extremely favorable rates of interest. The ability to acquire up to 10 residential investment properties with nominal capital investment has created an opportunity for a whole new class of investor that was previously only available to the wealthy.

Why invest in Real Estate?

Real estate is a limited-risk investment

Notwithstanding a historically unprecedented drop in home values during and immediately following the most recent U.S. recession, when you review historical data over the past five decades, real estate is still one of the most reliable investment options, with far less volatility in value than the stock market or other investments. And as the housing market improves throughout the country we are now seeing record increases in values again.  The August 2013 report by National Association of Realtors on the median existing home sale price showed homes in the west region, including Texas, experience year over year gains in home sale prices of in excess of 18%.  The preceding year was about 14%.  When compared to most other types of investments that provide similar rates of return, real estate is among the most stable.

Real estate can be leveraged

Although many investments can be leveraged (e.g. stocks purchased on margin), only residential real estate is such a sound investment that it is possible for an investor to borrow 100% of the funds required to purchase the investment. The ability to borrow the funds necessary to acquire an asset greatly increases the yield on that investment. If an investor pays cash for a $100,000 asset and it appreciates in value by 5%, his yield on the funds invested is 5%. If, however, he only invests 10% of his capital to acquire the same investment (borrowing the remainder using the asset as security), his yield is 50% (i.e. he received a return of $5,000 on the $10,000invested). It is the leverage potential of residential real estate that makes its potential for “yield” so impressive.

Ownership of real estate has favorable tax consequences

Tax laws favor real estate investment. As with most types of capital investment, gain on the appreciation of real estate is taxed as a capital gain, at tax rates as low as 0% and typically no greater than 15%. Real Estate has the additional advantage of being an asset for which substantial depreciation deductions can be taken, enabling an investor to pay no income tax on the investment, even during periods of positive cash-flow. And although the depreciation will typically be recaptured when the property is sold, the recaptured income will usually be at a rate below the tax rate for ordinary income. The ownership of real estate has the added benefit of being the perfect investment for an estate plan, since the valuable appreciated asset can usually be passed on to heirs and devisees of the investor at a “stepped-up” basis, virtually eliminating the tax on the property.

A great time to buy

A variety of factors are currently coinciding that make investment in real estate the most favorable it has ever been. Mortgage interest rates are at historical lows. Residential investor financing is available at APR’s well below 5% for fixed-rate mortgage loans. These extremely low rates make it possible to acquire real estate with little or no capital investment (down-payment) yet still derive positive cash flow from the investment. Thus, the timing is ideal for acquisition of properties at or below market value. The ability to acquire properties during softer real estate markets increases the long-term profitability and appreciation potential of a property.

Tax policy is now more “real estate investment” friendly than ever. Recent implementation of changes in tax law relating to capital gains make an investment strategy that includes residential real estate an excellent choice for limiting the taxes paid on investments.

Why AmeriFund?

The professionals at AmeriFund Realty Advisors possess the knowledge and experience to assist an investor with every element of the investment process. We’ve developed strategies for locating the “right” properties that can be acquired below market value, and have the greatest potential for both appreciation in value and the production of income.

AmeriFund is also the industry’s favored source for financing programs designed especially for investors seeking to minimize their capital investment without sacrificing a low rate interest that will insure future profitability. Our “piggy-back” loan programs utilize first and second lien financing to avoid mortgage insurance with financing at 90% to 100% loan-to-value ratios. Our “interest-only” programs permit investors to fully leverage the “tax-free” characteristics of a real estate investment by limiting the amount of principal payment during the initial years of the mortgage.

Finally, AmeriFund has the expertise to manage properties for investors who prefer to take a more passive role in managing their real estate assets.