Why Compass Realty?
Whether you are purchasing your primary residence or developing a vacant lot on Main Street, if you’re buying real estate you are an investor—and COMPASS REALTY IS AN END-TO-END REAL ESTATE INVESTMENT FIRM. That means we’re with you from purchase to sale. We can help you identify and contract the right property; we’ll be with you through the ownership of the property (and all the maintenance and oversight that goes along with it); and we can help you sell when the time comes.
Buying a piece of real estate is more than a simple exchange of money and property. Below are some considerations that will apply to your real estate investment at some point in your ownership time horizon. We’re here to help you understand these concepts if you don’t already and apply them with greater efficacy if you do.
Tax Benefits. Boring but essential. When you buy a primary residence, you just became eligible for the best tax benefit in the United States. There is more information, as reported by Forbes magazine, HERE. To whet your appetite:
“The capital gains tax exclusion says you don’t have to pay taxes on the first $250,000 of profit from selling your home if you’re single, or $500,000 if you’re married.” – Forbes
That’s big. Really big. You’re also able to deduct mortgage interest, real estate taxes, and much more. Check the above link for a more complete guide, and always check with your CPA.
Depreciation. Ready to dive deeper? You bought your first home, maybe you’re on your second or third, and you’re ready to buy that commercial building on Main Street. Uncle Sam is here to help you again. He’s going to let you depreciate that building. That means you’re going to get to write off the cost of a tangible or physical asset over its useful life…IE your new building. Depreciation and its associated tax benefit should be one of your considerations in purchasing a commercial property.
Leverage. When you borrow money to buy a property, the associated leverage magnifies your gain. Let’s say you put $20,000 (10%) down to buy a $200,000 property. Any appreciation you see at sale on your property accrues to you rather than the bank that lent you $180,000. The math is simple but powerful; let’s say you sell your $200,000 property for $400,000. The return on your equity investment of $20,000 is 11x (the math is: $400,000 sales price less $180,000 payment to your lender = $220,000 divided by your $20,000 investment11x). Compare this to the return on your investment if you paid cash rather than mortgaging the property; your $400,000 sales price divided by your equity of $200,000 would only yield 2x your investment. While this is a simplistic illustration, and needs to account for capital gains tax, the bottom line is that even a small amount of money can be leveraged via a mortgage into a large return on investment.
Zoning. Whether you want to rent out your garage apartment as a vacation rental or develop that empty lot on Main Street, zoning matters. There are restrictions on how your property can be used—sometimes favorable to you, sometimes not. Zoning is why a fellow investor can’t plop down a Quik-E-Mart next to your house in Kenilworth, why you can’t run an auto repair center out of that house, or subdivide your lot into 5 separate parcels. You need to understand the Zoning and any additional Covenants, Conditions and Restrictions (CC&Rs) associated with your property, and what these might mean for current and future use.
Maintenance. Maintenance is tough for some real estate owners. But you can prevent a LOT of missteps in your real estate ventures by going into the due diligence period with maintenance in mind. Don’t know if the house is on a well or septic? How old is that water heater? How about the HVAC? Roof? Plumbing? These all matter to your bottom line. Doing your best to figure out the condition of your property BEFORE you buy it is one of the keys to making a good investment. Compass Realty and Compass Home Maintenance Services were designed to work hand in glove to identify your next real estate investment and to maintain it whether you occupy the property or not.
Insurance. Whether commercial or residential, you want to insure your real estate investment. But insurance policies are neither simple nor standard, and there are some details to consider. When you talk to your insurance agent, you want to have a firm handle on what you need to insure. You purchased the property for $350,000—does that mean you need $350,000 in insurance? What is private mortgage insurance (PMI)? What type of insurance protects you if your commercial building goes vacant, and will any part of the policy lapse if this occurs? What happens if your tenant bails on the lease or the building burns—do you still get your rent? Insurance matters, and you want to insure your property correctly without overpaying.
Added Value. This is our added value at Compass. What value does the property have that someone else didn’t identify? Can you add a stream of revenue by bringing a garage apartment online? Will doing some clearing enhance the view, or will keeping trees protect privacy for future resale? How about environmental concerns—does the property have its own water source? Is it going to be flood-prone with climate change? Can you subdivide the lot and get two parcels? Can you get the property rezoned? Our economic environment and physical environments are always changing, and our real estate needs and analysis change with it. Maybe you own one of very few vacation rentals that has an EV charging station. Maybe your eye for biodiversity enables you to identify value someone else couldn’t see. It’s all added value, and it’s the wildcard in Compass’ bag of tricks.
The Deal. I’ve been through a LOT of these scenarios. I’ve been investing in real estate and remodeling/rehabbing my own real estate since I purchased my first home in 2003. Since then, I’ve bought, owned, and sold multifamily properties, managed residential rentals, provided maintenance on investment properties, and brokered residential and commercial investments. My substantive real estate experience in ownership, maintenance, rehab, investment and brokerage lend experience, foresight and vision to your real estate venture. But I’m not stuck in the past. There is always another deal, a different way to add value, something others missed.
Compass Realty is an END to END firm where vision marries with granular knowledge of the nuts and bolts of property.
Compass provides a real estate solution built to help you capitalize in any real estate market, regardless of the point in the cycle. When you sign on that dotted line, you become a real estate investor. All real estate has risks. But approaching real estate with an investment mindset, regardless of your goal for the property, positions you to meet your real estate and investment goals. Use my experience, my affinity for detail, capacity for research and outright elbow grease to get what you want and make it work for you. Whether that’s making sure Fido has enough space to run, ensuring that new commercial space helps your business produce (even if you’re not), or developing that property with a reverse build to suit, we can figure it out. That’s the difference in getting your clock cleaned and going to Sizzler. Call us.
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And STAY TUNED, more posts to come including:
- DON’T FLIP THAT HOUSE
- Waterfront Real Estate Minus the Water…Spoiler Alert, We’re in the Mountains
- 1031 Exchanges for Dummies
- Minor vs. Special Subdivisions
- Legacy Properties