Learning rental property 101 involves learning the financial and tax benefits that come with the job.
There are many reasons beyond just the topline net income you may generate from a property, that make being a real estate investor financially beneficial for you.
Sure, the income stream can be great but rental property can also be a great tax shelter for your current wealth and your tenants monthly rent payments are used to build equity in your properties – resulting in wealth creation.
We will take a look at the benefits you stand to gain when you become a rental property investment – landlord.
Benefits of Being a Landlord
The number one reason people invest in rental income is for the potential benefits.
Earning passive income that comes in the form of rent is what landlords or after. If you invest and rent your property out well you should generate rental income that matches or exceeds your monthly mortgage payment.
This this income will have to great benefits which include positive cash flow and equity growth as you use the rent paid down the mortgage.
If you use some of the rental income to maintain and repair the property is needed, you have a property investment that remains in good condition and generates income for you over the long-term.
We discussed the tax benefits of investing in real estate, but we will summarize below.
Tax Benefits of Rental Property
Since the standard homeowners insurance policy is not usually cover losses related to tenant occupancy, it’s important to get a policy that protects your investment.
Landlord insurance should cover the building, fire, liability and the contents of your property. You should be able to deduct the entire cost of insuring your rental property.
Property maintenance and repair expenses
Performing maintenance and repairs are necessary to keep your property looking good inside and out and functioning well. Repair and maintenance expenses that are important in reasonable are tax-deductible.
Examples of deductible repairs would be maintenance and repairs related to plumbing, painting, and roof repairs. Basically, any expenses related to keeping the rental property functioning well on that.
In most cases, the MACRS system – modified accelerated cost recovery system – is used for scheduling the depreciation of residential rental properties. Most of the time, you can deduct depreciation costs over 27.5 years.
You can deduct the full amount of interest that comes as an expense of taking out a loan to purchase or improve the rental property.
Professional Real Estate Services
Costs from professional services related to your rental property may be tax deductible. Examples of deductible costs include fees paid to real estate lawyers, property managers, and accountants.
You may also avoid paying taxes than you sell your rental property if you “switch” to another rental property. This is also called a “tax-free exchange.” Travel expenses are another deductible costs related to rental property management.
As you see, there are many tax and financial benefits that come with landlording.
Rental property management involves taking full advantage of these benefits to maximize profits and wealth creation for you and your family.
If you would like to speak with the best property management experts in Westminster, Maryland about other benefits of rental property investing, schedule a PROPERTY PROFITS STRATEGY SESSION.
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