Santa Clarita Real Estate Update
August, 2010 - Issue #70
Three Reasons to Purchase Investment Real Estate
by Joshua Suess

Newspapers, magazines and blogs are loaded with articles and discussions of why investment real estate is a bad idea. However, the number of people looking to sell their real estate is actually down from previous highs. The reason for this is that a number of smart investors still realize that real estate is an extremely compelling asset class. Not only does it provide annual returns equal to or in excess of any other asset class, but it also offers unique tax benefits.

Investors in real estate are typically looking for a combination of three types of benefits: appreciation, cash flow and preservation of equity. Of course, every investor says that they want all three, but, in reality, they do not. The investor who looks to purchase a run-down house to fix up and sell quickly for profit is likely not concerned with cash flow or preservation of equity, since the property generates no income and the area could continue to deteriorate. Conversely, the investor who pays a premium price for property in an extremely good location and uses no leverage will likely see relatively little appreciation in a normal market and little cash flow. The chance of them losing all of their money, though, is extremely low.

Another factor typically mentioned as a reason to purchase real estate - tax shelter. The tax shelter benefits of real estate are considerable. One form of tax shelter is the increase in net annual income due to depreciation, reducing the tax bill on net operating income. The other tax shelter inherent in real estate is that not only does growth occur without annual taxes, but thanks to the tax-deferred exchange, assets can be sold without incurring capital gains taxes (refer to a tax professional for specifics). The first form of tax shelter increases cash flow, and the second preserves investment equity. Both are parts of the three key factors.

For those who are looking to build their empires and portfolios, properties requiring work and which can be bought heavily leveraged can offer the promise of significant growth in value, even if they are upside-down from a cash flow perspective.

The secret to strategic real estate investing is to understand where one fits on this spectrum. With this knowledge, you will realize where to put your energy and equity and will be able to identify the perfect deal for your specific situation.
For more information and professional help with properties, please visit or call 702-4640.

Home Owners Associations: Are they for You?
by Jennifer Thompson

There are many communities within the Santa Clarita Valley that have Home Owners Associations (HOAs).

HOAs are incorporated by developers prior to the initial sale of homes, and the Covenants, Conditions, and Restrictions (CC&Rs) are recorded with the subdivision of the land.

The CC&Rs remain attached to the land/home. When a sale takes place, the new owner becomes a member of the association. All members must pay assessments and abide by the CC&Rs. The HOA can enforce its actions through fines and/or legal action.

Some important considerations when looking at a purchase within a HOA community: know the monthly dues of the association, make sure that you are comfortable living with the CC&Rs, know who the board is comprised of and the financial stability of the association. Living in a HOA community is not for everyone, so make sure to explore all options with your Realtor® when looking to buy a home.
Jennifer Thompson is owner of and Realtor® with Regal Realty of California 295-8715
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