Investing Your Tax Refund: How to Make Your Return Work For You – HomeUnion

Investing Your Tax Refund: How to Make Your Return Work For You

With Tax Day just behind us, money is on the mind of most Americans, as I imagine it may be for you. According to a recent report from the National Retail Federation, approximately 47% of Americans expecting a tax refund this year plan to deposit it in a savings account. “Americans are thinking of the future, and remaining financially secure is a big part of that,” says NRF President and CEO Matthew Shay.

Are you among the 47% of Americans planning for their futures? Do you have a nice little nest egg squirrelled away for retirement? Regardless of your situation, if you’re planning on saving your refund, you’re most likely considering putting it in some kind of savings account. It certainly seems like the best option, and you know it’ll sit there collecting dust…I mean interest. The average interest on savings accounts in the US currently hovers around 0.17% APY. That’s not to say that there aren’t some with higher rates – some with rates almost 10 times as high. Even if you manage to find an account that has a whopping 1.10% APY, like the SimplySavings Account from Michigan-based Flagstar Bank, your actual yield will continue to be quite low. Say you had $25,000 in this savings account with a 1.10% APY, your annual yield would be an additional $250. In this scenario, your money isn’t working very hard, is it?

Putting your money in the stock market instead is certainly a legitimate option with the potential for a higher yield. But an often-overlooked option would be to diversify by putting some money into an investment property. I can hear your objections already – “my tax return isn’t going to buy me an investment property!” And, no, it probably won’t. However, if you fully leverage the property by putting 20% down and get a mortgage for the remaining 80%, you could. With real estate, you have the benefit of leverage – you can get a mortgage with 20% down and then lease the property to generate income immediately. Your tenants’ monthly rent check takes care of the mortgage payment, expenses, and puts cash in your bank.

For example, if you have approximately $25,000 in a savings account you could use that as a down payment on a $75,000 house. This amount would also include the rehab and closing costs. After all expenses are taken into account, you could potentially net $2600 in annual returns. That’s $2350 more than the original savings account example with very little work on your part.

“That sounds great,” you think. “Too bad there are no homes in my neighborhood for $75,000.” You are probably right. The solution is to choose an investment property in a different market. Not only is it more affordable; you’d be surprised by the projected returns you could possibly get. You can conservatively estimate a 6-9% ROI, inclusive of all expenses. That’s 5% more than the highest return you’d get with a high interest rate savings account.

The key to successfully investing in real estate is choosing properties in the right market that have positive cash flow. Only invest in properties where the rent will cover the mortgage plus any upkeep and expenses, and leave you additional cash. HomeUnion® has run the numbers to determine the best investment properties in locations with the highest returns. Register to browse HomeUnion®’s database of pre-vetted investment properties. Once you find a few you like, take a look each property’s financial summary page to see an estimated return on your investment.

Real estate has many benefits in addition to an increased ROI. Because it’s a real asset, you own something at the end of the day. You also benefit by depreciating the property, by deducting a portion of the cost of the property each year on your tax return. Because it has an underlying real value, it also provides a hedge against inflation.

Now that you see that value of investing in real estate, let’s show you how you can be an investor without having to be a landlord by taking advantage of the very best markets with the highest returns and enlisting the help of our all-inclusive management service. Because let’s face it – 2AM calls from tenants complaining about malfunctioning plumbing is the last thing you want to think about. Download our free whitepaper “Be an Investor, Not a Landlord” for more information.





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