Filing your income taxes as a rental property owner is a little different from filing as an individual. You essentially own a small business, and your taxes will be higher for that reason. Fortunately, there are a few different ways you can reduce what you’ll have to pay to the IRS.
Start With Deductions for Property Repairs
You can start to get more out of your taxes by remembering to deduct your repair costs. If you have paid out more than $600 in a 12-month period for professional repair services, you can deduct those expenses on your income tax form. Be sure to keep receipts in case you’re asked to verify your repair expenses.
Don’t Forget Your Home Office
It pays off to use a room in your own home to manage your rental property. As long as you use this room solely for this purpose, you can deduct a portion of your rent or mortgage as a business expense. Be sure your home office is not used for recreation or other purposes, or you may be disqualified from using this deduction.
Add More Revenue Sources
You can increase your income potential by adding amenities and services to your rental property. Consider investing in coin-operated laundry machines, snack and beverage vending machines, and other money-making opportunities. You can also offer services, such as landscaping services, to your tenants. Charge a few dollars over the fee charged by the landscaping service to help you make these services more profitable for you.
Use Schedule-C to Your Advantage
When you file a schedule-C form for your taxes, you can make even more deductions. Under this tax filing method, you can deduct expenses associated with any tasks you perform in the management of your property. For example, you can deduct the gas and mileage used to deposit rental income or to drive to your rental property. You’re also allowed deductions for time spent hanging rental vacancy signs, buying supplies for the property, and performing similar tasks.
If you’re unsure about the deductions and incentives that are available to you, talk to an accountant or tax attorney. A professional can help you prepare your taxes correctly. Additionally, they may know of new tax breaks that are available to you since they will keep up with how tax laws change from year to year.
Buying a home for the first time is a very important step in a person’s life. Deciding what city your home will be in is a huge part of that decision-making process. There are plenty of good places that first-time homebuyers can choose to live, but there are also some cities that are not such good options.
Bankrate studies of 50 metropolitan areas show the best places in America for people buying their homes for the first time. The locations were decided based on wellness, affordability, safety, employment, and the tightness of the market. Out of those 50 metro areas, Los Angeles, California, was last on this list because its average income for homeowners was so low. Another problem with homes in Los Angeles is that the price is often very high. The number one city on this list is Pittsburgh, Pennsylvania, because even though its average income is about the same as Los Angeles, the housing market in Pittsburgh is much tighter.
According to those studies from Bankrate, the top ten cities that rank as the worst places for first-time homebuyers to live are San Diego for the tenth number place, Orlando, Florida, San-Francisco, Houston, Denver, San Jose, California, Riverside, California, Seattle, Las Vegas, and in the number one spot in Los Angeles. One of the most noticeable things about this list of cities that are the worst places to purchase a home is that so many of these cities are in California. Another noticeable thing is that each city in California ranks at the bottom as far as affordability goes.
Despite what this list shows, some of those cities that rank at the top of the worst may still have some good qualities. Los Angeles has a high ranking for wellness and culture despite its low ranking for jobs and affordability, so it is possible that some first-time homebuyers could find those advantages to be more appealing. Several of the other cities on this list may have similar advantages that make them more appealing as well. It is very important for first-time homebuyers to do their own research to choose a home in a location that really feels right to them.
In 2006, real estate was a hot area for investment in many parts of the country. Prices went up, and credit was easy. Liar loans and mortgages with adjustable rates allowed people to buy more homes than they could afford. Then, the market crashed. Foreclosures increased rapidly, and many people found themselves underwater with their loans. They owed more than their homes were worth. There is a real fear that American real estate is in another bubble. This is why it’s important to be proactive in protecting yourself from the possibility the bubble will burst.
Don’t Buy What A Bank Offers
Most realtors will want to see pre-approval for a loan that shows how much a buyer can borrow. It’s not a good idea to search for a home at the maximum loan amount. Buying a house at a lower cost will make the monthly payments easier to make.
Put Money Down
Some government programs allow people to buy a home with no money down. Others, like the FHA loan, require a mere 3.5% down. This is a dangerous loan if the market collapses. Coming to closing with a 10% or 20% down payment provides instant equity and makes it less likely that you’ll wind up underwater with your home mortgage.
Situations change unexpectedly, but those who plan to move within five years should avoid buying a home. Because most of the payments go to interest in the early years of a loan, equity will be difficult to build in the short run. Closing costs and realtor commissions can come with financial stress. Therefore, unless you plan to stick around for at least five years, renting is usually a better option.
Have An Emergency Fund
Having some money stashed away is a great stress reliever. That money can also go toward paying down a home that winds up underwater during a housing bubble. Most experts recommend having three to six months of expenses available. An emergency fund can alleviate the need to use home equity or a credit card for an unexpected expense.
Housing bubbles can lead to higher rates of foreclosure. They can also erode the wealth of many households. Taking these steps before purchasing a house can make it less likely that a family will be hurt badly if a housing bubble bursts.
For any Millenials considering or even beginning to scope the real estate world, you’re on the right track. Real estate investing is one of the smartest moves anyone could make, considering the versatility and potential returns. Investing in property comes with neat benefits like passive income, tax benefits, and full control over not only the property and your investment strategy but also your profits.
That being said, deciding to invest in property can be super daunting. Where do you start? What do you do with the property?
To nudge you in the right direction, here are some essential things that Millenial real estate investors should know before jumping in.
Know your budget and credit score
While it’s not necessary to be wealthy to invest in real estate, having some savings will help buffer any risks from investing or at least reduce the uncertainty.
Establish a financial goal and investment strategy
Know your goals and the best plan to get there. Generally, most investors don’t need to pay for an entire, say $250,000 property. This is for the Millenials who are still struggling to pay off school debt: don’t worry, you can invest as well. The cool thing about real estate investing is you can purchase most properties with a down payment, which tends to about 20% of the total price. Options like getting a bank loan or lending from a trusted partner are also helpful for millennial real estate investors with limited cash at their disposal.
Scope the market
Knowing where to look for viable property options requires looking at patterns like population growth, rental demand, and job availability.
Consider the type of property.
Here, you have a few choices at your disposal. The top types of real estate include single or multi-family properties, syndications, or buy & hold turnkey funds. Single or multi-family properties are in high demand and involves a short-term strategy. Syndications are larger, commercial properties with a group of investors, resulting in less risk. Turnkey real estate funds are longer-term investments that offer immediate passive income from tenants already living there.
When you know the type of property you’re looking for, it’s time to take a look at locations you’ve identified based on the real estate market. With your budget in mind, figure out if you want to flip a house or if you’d rather be a long-distance landlord for a turnkey property.
Above all, millennial real estate investors must continue learning and growing. While the first step is to try it out without hesitation, further education will make Millenials savvier in their real estate journey.
The most popular choice among real estate investors, the single-family house, is well understood and profitable. Even in a market prone to recession, many people prefer single-family homes over condominiums, duplexes, or triplexes when it comes to investing. However, not everyone is delighted at the idea and wants to follow that route. Some investors may consider investing in multi-family units. And multi-family dwellings, especially with fewer units, tend to increase the value that matches closely with single-family homes, and their cash flow is a lot better compared to single-tenant dwellings.
This information talks about the details of finding a multi-family property and offers insight on why it can be a pleasing alternative.
Location, Location, Location
Location is of absolute importance in determining the value of a multi-family property. When the neighborhood has well-maintained lawns, quality homes, clean sidewalks, and proper signaling at intersections, it’s easier to find tenants. If there is construction activity in the neighborhood, it’s a sign of growing demand. On the flip side, if crime is on the rise in a particular area, people want to move away, reducing the neighborhood’s overall value. A change in zoning from residential to mixed-commercial use can result in a significant price reduction.
What is Inside Matters
The physical condition of the property, age, and structural stability have a noticeable effect on property value. The choice of paint color, cabinets, countertops, and flooring material matters too. The more bizarre the upgrades, the more likely that it’ll lose its market value. Likewise, the quality of craft, both in terms of original construction and recent upgrades, should be considered before purchasing a multi-family property.
Hiring a Real Estate Agent
A real estate agent can help find a multi-family property unless you insist on doing it yourself. With an agent’s assistance, you can easily wade through many unique situations, questions, and doubts that are usually not encountered in a typical single-family home buying. For example, your loan interest rate and type of purchase ( residential or commercial ) will depend on whether you are buying a duplex or an apartment with five or more units. Should you hire an accountant as well? Probably yes, if the number of units and complexity of your overall tax situation increase.
Homeowners often buy and sell their property. The most important aspect of a house listing is to be seen by as many people as possible to increase a sale’s chances. Despite a general market saturation in the housing sector, it is possible to achieve a higher listing and to reach a wider audience with a few tips and tricks as outlined below.
Invest in SEO Marketing
Search Engine Optimization is a tool that, when used properly, gives homeowners a competitive edge when it comes to online searches increasing home showings. The house listing is prioritized through specific keyword searches. It is advisable to have several long keyword phrases that include the general scenery where the house is located.
Make use of a Lockbox.
A lockbox is becoming one of the avenues that are giving homeowners a competitive edge. It allows the agent to show the house to house hunting individuals even when you are not home. It should ideally be located close to the house so that the agent can have easy access to it while you are away.
Host an Open House Event
One way to pull in the masses to a house showing is to host an open house event. Employing channels such as social media, the local newspaper, and website listings will attract many interested buyers locally. During the event, it is crucial to keep the guests entertained by serving snacks, having brightly lit balloons and banners, and having a magician or clown entertain them.
Offer Time-bound Deals
Proposing a good deal that runs out in a limited time is another way to get people looking into the property. Scarcity induces demand. Since everybody wants a good deal, they will be more motivated to purchase soon if the offer is only on for a limited time.
Any homeowner’s goal is to make the most amount of money they can from selling the property. However, sometimes pricing it at the higher points doesn’t work in favor of the home seller. Having a competitively priced house allows buyers to get it at the listing type’s estimated market value.
A combination of the above tips gives a home seller a competitive advantage, and the client handling the sale of the house can have a much smoother time as they coordinate the sale on behalf of the homeowner.