INVESTORS’ CORNER: Know Your “Nut”

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                                                   (Part 4 of a Series) 

What does it take each month for you to cover all your essential living expenses: rent; or mortgage, taxes and insurance (PITIA); food; clothing; transportation; insurances; utilities; home maintenance; and other necessary monthly expenses that must be met. This is your “NUT”. This “Nut” total is the key to every household’s survival. This is the amount of money you need to generate to keep the house standing and the lights on. This Nut must be the primary goal of every family.

If you are making your Nut comfortably from employment, you must nurture your employment and SAVE as much as you can each month towards a rainy day.

After covering your Nut and your savings each month, put aside an amount that is comfortable for investing toward your retirement. Should you decide to invest in real estate, these are the funds you would use to help you gain control of real estate.

You need to review your last three years of tax returns in light of how much you are paying each year in Federal income taxes and what the tax implications of real estate ownership will be for you. You need a very, very competent tax counsel – not a tax preparer. Go over your income/financial situation with the tax advisor and project what impact real estate ownership and rental income will have on you.

If you have completed all the above items, you should have a much better understanding of where you are financially. With this clearer financial understanding, you can begin to make a better decision about why you should or should not be acquiring control or ownership of real estate. You will also be able to see what assets you have that will help you in your real estate acquisition. You should also determine now what assets you will not use to fund your real estate investing career.

JC Underwood is the director at the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. He can be contacted at [email protected]. For more information, visit www.MetrolinaREIA.org.