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.
Airbnb has had a huge impact on travel accommodations, and those who have chosen to stay in an Airbnb may wonder if hosting an Airbnb rental is a good investment. Becoming an Airbnb host is appealing in several ways, including the ability to add to your income without being an expert in real estate. However, hosting an Airbnb may not be right for everyone because there are some disadvantages to it as well. It is important for potential Airbnb hosts to research and learn if hosting an Airbnb will be a good decision and investment for their life.
The first thing potential Airbnb hosts should learn is the difference between an Airbnb and traditional investment property. Airbnb rentals are short-term with several different renters over time, and traditional investment properties are for tenants who plan to stay for a very long time, even years or decades in some cases. The next thing potential Airbnb hosts should do is research the market to find out if any outside circumstances are causing it to change, such as the recent COVID-19 pandemic. The pandemic had a huge impact on the Airbnb industry by creating quite a decline in customers in 2020. However, there has been a recent surge in Airbnb customers who are becoming more comfortable with the pandemic, trying to find ways to stay safe and have a fun vacation at the same time. Those people find comfort in an Airbnb that is located in a travel destination place that is both secluded and desirable.
Potential Airbnb hosts must also consider the legalities and expenses that come with renting out an Airbnb, including maintenance, furnishing the property, extra amenities like Internet and entertainment subscription services, utility bills, home insurance, and specific Airbnb laws in each state. On the upside, it is possible for someone to have an Airbnb almost anywhere since many people use Airbnb for business and events that could take them anywhere in the country instead of just the standard vacation spots that were once the norm. If potential Airbnb hosts price their rental correctly and does their best to make their rental appealing to potential tenants, an Airbnb can be a very smart investment income.
One of the best ways to pump up your real estate professional muscle is to build your own social media following. Learning how other “real estate stars” participate online with the large followings they have engineered can give you a clue about what’s been working for them –- and which might work for you. These folks also frequently offer valuable insights into the industry that you can use.
Here are some examples:
This guy made his name with the high-profile New York real estate operator, Douglas Eillman. It doesn’t hurt that he has a starring role in “Million Dollar Listing New York,” the Bravo channel TV hit. To top it all off, he’s the best-selling author of “The Sell: The Secrets of Selling Anything to Anyone.”
So, sure, a guy like this is going to garner gazillions of followers. However, other real estate professionals can learn from his high-flying lifestyle and the tenor of what he posts. It’s all about “creating an aura of success” on social media that helps nurture even more success.
He happens to be the co-founder and CEO of Zillow Group. Barton launched Zillow in 2006 with partner Lloyd Frink and today the company is worth more than $3.4 billion. As a media company serving the real estate sector, Zillow and Barton offer endless insights into what’s happening and what you need to know. For example, his latest Twitter post offers insights on how “work” has been unbound from “location” and the consequences this has for real estate operators.
He is the chairman of HomeServices of America and the CEO of Berkshire Hathaway HomeServices. Houston Agent magazine recently named him one of the “10 Most Powerful Influential Leaders and Executives.” Following him on Instagram will help real estate pros find inspirational events and cogent information that can be put into practical use to further a career in this dynamic field.
He is the co-founder and CEO of OpenDoor. Before that, he founded Movity.com, a location and data analytics firm. He recently posted a guest article in USA Today describing how OpenDoor disrupted the $1.6 trillion U.S. residential market. Clearly a thought leader in the real estate sector, following Wu on Facebook, Twitter and Instagram is a steady source of information that will be relevant to your career.
Commercial real estate is closely related to residential property. So, many professionals still get confused when trying to tell the differences. Many property buyers remain uninformed about changes that are occurring in the real estate industry. Becoming a better buyer or seller starts by understanding the fundamental aspects of the industry.
Understand the Basics of Commercial Real Estate
Many commercial real estate owners lack a basic understanding of the business in which they work every day. Some investors continue to work for years without knowing all of the differences between commercial and residential properties. For instance, operating, repairing and maintaining a commercial property is more stringent than running a residential building. The work may require undergoing additional legal procedures along with additional paperwork and longer wait periods.
Think Like a Professional
Every commercial real estate buyer or investor must think like a manager or owner does. To reach professional levels, the buyers must do at least a year of research about commercial buildings and continue their education indefinitely. It’s important to become fully knowledgeable and confident to the point of knowing how to educate other people on the same topic.
Review Industry Trends
Within one year, the real estate industry can undergo several, major transformations. Each year, there are industry trends that affect the types of commercial properties that people buy or invest in. During a pandemic, investors may stop supporting restaurants altogether and invest in retail or grocery stores. Overall, if someone does not know the latest trends, he or she will make costly mistakes when dealing with real estate.
Learn About Specialties
Commercial real estate is not one large field where every business and building is the same. There are many specialties of commercial real estate, such as office, retail or industries, to choose from. Most clients look for professionals who have specialized knowledge in certain subfields.
Commercial real estate is never a simple or straightforward area of study. There are many different types of individuals involved from small business owners looking to rent buildings to companies looking to construct buildings on raw land. Understanding every aspect of commercial real estate is recommended to make the wisest decisions. There are plenty of tips, tricks and resources available to assist in the learning process.
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.