Real Estate–the Ideal Investment Opportunity? (Note: this paper must be more than an examination of investment tools, i.e, REITs, etc.)
Proposal
With this topic I was thinking about discussing the purchase of foreclosed homes or dilapidated homes, renovating them and renting or selling for a profit. I know there is a TON of tv. shows out there that do renovations and rent or sell but, in my opinion, you can’t really trust reality tv. I want to discuss the different real estate investment opportunities out there, as well as limitations if any.
How many main points do you want us to have? If you are okay with my idea do you have any input on potential discussion points I can hit on?
Professor Response:
A discuss of “housing flipping” is solid topic but one that will need a very detailed economic overview. In addition, you will need to examine ALL the tax consequences of real estate as an investment property. Here are some helpful hints: 1) you will want to fully examine the impact of IRS rules on owning investment real estate to include 1) the concept of bifurcation when dealing with depreciation, 2) the impact of cash flows or income, 3) the impact appreciation of property values, 4) income tax savings due to impact depreciation and 5) the impact of principal reduction. In addition, you will need to examine the impact of 1031 and 1033 exchanges as allowed by the IRS Tax Code. Go for it.
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