5 Basics for Building Wealth Through Investing in Rental Property
With a relatively modest amount of capital and income, you can profit from real estate investing – once you recognize the chief elements of the rental-property marketplace:
- Taxes may be inevitable, but they are also controllable. In rental properties, you currently benefit from cash deductions for financing, management and operating costs as well as non-cash deductions for depreciation. You also benefit from possible lower long-term capital gains tax rates or tax deferral.
- Leverage involves multiplying your profits by financing as much of your investment as possible and reducing your down payment, thereby limiting the amount of cash tied up and increasing your tax deductions.
- "Positive cash flow" means income either before or after taxes. A savvy investor knows how to turn "negative cash flow" into positive, by maximizing rent through various strategies and through depreciation deductions.
- Appreciation, the result of selling at a higher price than you bought, appears to be a trend that shows no signs of abating. In investing, the important thing is to choose property in a location where prices are rising more than in other areas.
- Equity, the difference between the property value and the remaining loan balance, brings a profit either through refinancing or sale. Timing is a key consideration in maximizing equity profits, since the longer you own property, the fewer tax breaks available to you.
If you’re thinking about investing in your future through real estate, call or e-mail us for professional assistance in finding the right property for your situation.
