Real Estate Investing

Here are three great real estate-related gift ideas that also happen to be tax write-offs. These are kind of different, and may not be for everyone, but they’re worth a look at least.

Make It Right donation: This campaign, spearheaded by Brad Pitt, aims to build eco-friendly homes in New Orleans’ Lower 9th Ward, the area hardest hit by Hurricane Katrina. You could “adopt” an entire house, or only a piece of a house, as a gift to someone who needs nothing and who values such initiatives. And it’s a donation, so it is a tax write-off!

Give Your House Away: OK, so when you give your house away to a charitable organization like House Angel or Real Estate With Causes, you might not actually get to see the recipient’s response. But you’ll feel better having done some good. You’ll also get a tax deduction equal to the home’s current market value, not what its value was when originally purchased.

Buy a house for your college student: This is the ultimate gift for a college student. You can sign them up as co-owner and help build their credit as well, an added bonus. There are, however, pros and cons to this scenario. Consider it carefully before deciding one way or the other. But of course, it is well known that real estate ownership has tremendous tax benefits.

Gee, who wouldn’t love for their parents to buy them a $200,000 home as a “Welcome to College” gift? Apparently, that dollar figure is on the low end of what parents are spending these days, according to a real estate article on MSN. There are many pros to this seemingly outlandish scenario, however.

1) Sign your son or daughter up as a co-owner and help build their credit.

2) Increased odds that the “empty nest” to which you’ve become so accustomed will stay that way.

3) Make the college housing quandry benefit your pocketbook instead of throwing money away on it. Make money off monthly rent from co-occupants and appreciation from resale.

4) With your son or daughter listed as co-owner and resident of the property, receive the owner occupied interest rate on a mortgage.

5) As a result of #4, no capital gains tax upon resale.

Investing in student housing isn’t all roses, however. There are many unknowns, including whether the son or daughter in question will drop out of college. It seems there would be no shortage of renters as college-funded housing becomes increasingly scarce, especially for students who are older, married or have children. However, if the property is to be sold in four to five years, there might not be enough time for it to appreciate to any great degree. Hypothetically, if the stars align and the son or daughter graduates and even decides to stay in that town for a while, they will have learned an invaluable lesson in real estate landlording, ownership and appreciation.

Chicago Tribune editors must read this blog! Just kidding, their article about investing in student housing actually ran one day before my recent post on the topic.

In the news article, readers learn how Illinois-based Prime Properties increased revenues eightfold over three years and landed on the Inc. 500 list of America’s fastest-growing privately held companies. All this success came after the company broadened its spectrum to include student housing.

Indeed, money hasn’t been the problem for Prime Properties. After all, the company has 1,544 beds in 56 buildings worth $60 million and plenty of investors waiting in the wings at the ready. Instead, one of Prime Properties’ true challenges has been keeping apartments full despite the turnover each fall, the article states.

Chicago-based Scion Group was having such success in the student housing market that it recently teamed with ASB Capital Management. The joint venture agreement tripled the size of Scion’s workforce and bolstered its buying power. Scion’s main challenge: time.

“We are limited far more by time than anything,” says Scion founder and CEO Rob Bronstein. “A building with 500 students is a complicated business. Literally every day, decisions need to be made by the manager and owner.”

Scion’s strategy: Plan multi-million dollar capital improvements like eco-friendly upgrades, pool tables and plasma screen televisions, with cost spread out over at least about five years. Don’t overlook community colleges and junior colleges. These schools are also interested in having student housing within close proximity, a niche that helped Scion get its start. Above all, remember that money alone does not ensure success. Experts recommend doing the research, knowing the “lay of the land,” carefully selecting tenants and studying up on management skills.