May 28, 2020
Owning rental properties is a great way to build wealth. It requires work, and it comes with its share of headaches, but long-term, owning investment properties has proven to be a real winner!
First and foremost, when you own an investment property, the tenant is paying down your mortgage. OPM means other people’s money. You’re taking advantage of OPM when you have a tenant paying the bills.
In some cases, the monthly rental income exceeds the monthly expenses on the property. In that case you’re making money every month. In Southern California it is hard to find a property that cash flows on day one. That being said, for me, the real benefit comes when the property is paid off in the future.
The IRS allows you to deduct expenses for repairs and upkeep, which helps the bottom line. Property taxes and insurance are also deductible. However, a landlord cannot deduct improvements. A Landlord can deduct depreciation on the property, which is the loss in value of the structure. This depreciation comes over the span of 27.5 years.
As mentioned above, the biggest benefit of owning an investment property comes when the property is paid off. The rental income that the property produces will rise with inflation. The income the property produces will allow the property owner to produce inflation-adjusted income over time.
Down the road, if a landlord wishes to sell their investment property there will be tax consequences in the form of long-term capital gains taxes. In many cases, those taxes are less than regular income taxes. A landlord can trade into other investment properties and avoid these taxes by going through a 1031 exchange. Many people 1031 exchange into less hands-on investment properties as well.
Reach out to discuss your investment property plans. I’m happy to help.
Stay up to date on the latest real estate trends.
September 28, 2022
Mortgage interest rates play a huge role in home values. These rates are now at 2002 levels, up sharply from all time lows in 2021. The average 30 year fixed mortgage …
April 7, 2022
Let’s face it… A lot of real estate investors are priced out of California, and prices are continuing to climb. Here is an example. In 2012 an investor could purchase …
April 6, 2022
Let’s face it… A lot of real estate investors are priced out of California, and prices are continuing to climb.
March 16, 2022
Market Real Estate specializes in selling inherited properties. Oftentimes our clients have a quite a project on their hands. One of their biggest concerns is what to …
March 15, 2022
Market Real Estate specializes in selling inherited properties.
January 6, 2022
We highly recommend a fresh coat of paint. Paint creates a huge return on investment. The “in-style” colors seem to change fairly quickly these days. We went from tans…
December 30, 2021
Going back a few generations there was very little credit extended to people interested in purchasing real estate. Fast forward to the first decade of the 2000’s credi…
December 14, 2021
There is a lot of competition amongst buyers in our housing market. There are simply more buyers than properties available. There also happens to be quite a few buyers…
November 4, 2021
Zillow’s CEO stated, “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated.” I Think it’s incredibly hard to predict home p…
You’ve got questions and we can’t wait to answer them.