Monthly Archives: October 2007

Flying is a terrific way to get from Point A to Point B. And logic presumes that any airplane could do that for you. But is that true?

During the process of learning to fly an airplane I quickly learned that each and every airplane is different. Different checklists. Different performance levels. Different capacities, weights and balances.

The earliest pilots flew planes much like this Piper Cub still in use today. These planes would make them free from the Earth and allow them access to the skies in unprecedented fashion. They could travel farther, faster and more enjoyably than ever before.

Science moved forward in lock step with engineering. Compare the cockpit of the pictured Cub to the all glass cockpit of the Boeing 777.

Excuse me, Chris. But you are doing it again. May I remind you that this is a blog about real estate investing. We know you used to fly airplanes. Cool. We’re impressed. Whatever. Can you please get back on topic.

Alright. Sorry. But again I have to remind you that lessons in life are easily transferred. Today’s Boeing 777s fly on the exact same principles as yesterday’s Piper Cubs. But the 777s have learned from experience, improved on function and the result is superior performance.

Yes. Both planes can take you from Kansas City to Los Angeles. But one can get you there in 1/10th the time while allowing room for error and greater performance.

Today, many real estate investors are still using the real estate investing techniques of the Piper Cub. Twenty to twenty-five percent down. The one percent rule. Cash flow is king.

And while not discounting those, and many more, tried and true methods I want to point my finger upwards to show you the jet that is smoking you. It’s flying higher, faster, farther than you are and without the fuel stops that you have to make.

Consider other options to maximize your investments. Learn from the real estate investing principles that have been given to you and see what others are doing with them. Don’t know what I’m talking about? Then we need to talk.

I got a phone call today from a person wanting to know about real estate investing. In fact, she and her husband will probably read this post and know I am talking about them. 🙂

Anyway, the subject of buying a home and letting their mother live in it came up. Is that an investment rental property?

Maybe yes. Maybe no. The IRS, as I understand it, wouldn’t look too kindly on that situation. It’s not “arms length.” So if you are going to do something like that you had better check with your CPA first. One thing you could do is to make sure, and document, that your family member pays fair market rents for that housing unit.

Of course, if the IRS disallows the rental property as an investment you might be able to count it as a second home. Any thoughts chimed in here by CPAs would be most appreciated.