Capital Gains: Your First Investment Should Be the Roof Over Your Head | 2 of 4
Your First Investment Should Be the Roof Over Your Head:
If you are reading this looking for a cheat code, you are going to be pissed. I’m not here to give you “how to get rich overnight” advice. Frankly, this is going to take not just years, but decades. But you can’t wait to start. You have to get your first place, and rather than give your money away to a landlord, give that money back to yourself in the way of purchasing a home for yourself.
It's a stepping-stone home, not a forever home. Remember that.
Last time we outlined the 3 ways to avoid capital gains tax on your real estate investments, remember?
The 2-in-5 rule (IRS Section 121 Exclusion)
Refinancing, not selling
A 1031 tax deferred exchange.
In this post we are covering your first investment - your first home. Remember, rather than give your money away to a landlord, pay yourself first. Are there other ways to invest? Sure. But this method has shown time and again the easiest way to build wealth over time, and I want to give you a few tips to help you avoid mistakes and pitfalls should you decide this is the right path for you. (i'm working on another series for Tech-Workers where I'm outlining the difference between investing in the stock market, and in real estate. It will be worth a read for sure, even if you are not a 'Tech-Worker.'
What are the criteria for a stepping-stone home?
Find a modest home in a great area.
NOT next to an apartment building (if you can help it).
3 bed, 2 bath is ideal, but 2 bedrooms can work - even one bedroom. More is better.
Avoid condos and HOA’s if you can. The HOA fees can change, increasing your payments.
Townhomes work.
Consider the schools - even if you don’t plan to have kids, schools matter when it comes to home values and appreciation.
Does it work for you in your situation NOW, even if it’s not your “Dream home”?
When considering real estate investments, start by purchasing your own home. This initial investment not only provides you with a place to live but also sets the stage for future opportunities. By purchasing your own home, you also get the advantage of capturing the lowest interest rate possible. With a loan, even if you only put 5-10% down, the math can still work. By taking a strategic approach, you can turn your home into a valuable asset that generates income and appreciates over time. That's the key - over time.
Purchasing your own home as your first investment is a critical step in building a solid real estate portfolio. Not because it changes much right away, but think about what happens when you buy your next home, and keep this first purchase as an investment...
You'll be locked in with a low rate; you'd have had a few years for rents to meet or exceed your mortgage payment etc.
In the next post - things really get exciting. W're going to discuss how to leverage your first home for future investments. Step by step. Exactly how to simply and easily have investing in real estate make a significant impact on your retirement - and how to best avoid capital gains tax.
If you're making a move, reach out, and lets chat. Happy to brainstorm and come up with a solution that gets you a tangible and actionable plan that fits your unique situation.
Best,
Justin H Gazabat
Broker | PNW, Seattle, Ballard, East Side
Your Friendly Seattle Neighborhood Real Estate Professional.
www.JustinGazabat.com
P.S. I sincerely appreciate your continued trust and generous support of me and my business. It truly means the world to me when you think to connect me to your friends, family, and co-workers.
P.P.S. If anyone in your social or work circles is considering a move, just send an intro text or email with their best contact info, make sure everyone is CC’d and I’ll take care of the rest! I promise to take great care of them, serve them well, make you look really good in the process. Plus help them get great results! Referrals are crucial to our business, and we genuinely value the opportunity to serve you and your network.
