These days, many people are trying to find ways to capitalize on the economic recession, build some equity in real estate, and also earn money in the process. One primary path to doing this is to purchase rental property and reap the tax advantages. What most people don't consider throughout the decision-making process, though, is that in order to do this, you also have to be willing to be a landlord.
First, let's discuss some of the tax benefits of owning rental property. The first, most basic thing you can do is write off any excess mortgage interest and taxes assessed on your rental property. This is a real benefit for real estate owners, since it saves them upfront costs in the long run. You should also note, though, that you must amortize any mortgage points you pay, which is generally different from what you would do for your primary residence.
Next, any operating expenses you could feasibly incur can be written off, as well. Any utilities you have agreed to be paid, for example, can be written off. The same goes for the cost of insurance premiums, homeowner association fees if you own a condominium or a townhome, and expenses going toward repairs and maintenance of the property, to name a few. You can also depreciate the cost of your rental property over approximately 30 years while its value is still hopefully increasing.
You probably love the sound of all of this. Tenants are also part of the deal, though. You can find great people as tenants, if you know where to look. Good tenants keep on top of property maintenance, paying rent and informing you when there is need for a repair. Some tenants just aren't up to par, though, so you must assess your patience and determination before proceeding. What if you have a tenant who doesn't value paying rent on time or paying it at all? What if they have no qualms about destroying the residence?
While the benefits of rental property tax advantages are great, you consequently have to know your own limits. If you think you're up for the challenge of being a landlord, however, this might be a wise choice to generate extra income in the real estate investment sphere.
First, let's discuss some of the tax benefits of owning rental property. The first, most basic thing you can do is write off any excess mortgage interest and taxes assessed on your rental property. This is a real benefit for real estate owners, since it saves them upfront costs in the long run. You should also note, though, that you must amortize any mortgage points you pay, which is generally different from what you would do for your primary residence.
Next, any operating expenses you could feasibly incur can be written off, as well. Any utilities you have agreed to be paid, for example, can be written off. The same goes for the cost of insurance premiums, homeowner association fees if you own a condominium or a townhome, and expenses going toward repairs and maintenance of the property, to name a few. You can also depreciate the cost of your rental property over approximately 30 years while its value is still hopefully increasing.
You probably love the sound of all of this. Tenants are also part of the deal, though. You can find great people as tenants, if you know where to look. Good tenants keep on top of property maintenance, paying rent and informing you when there is need for a repair. Some tenants just aren't up to par, though, so you must assess your patience and determination before proceeding. What if you have a tenant who doesn't value paying rent on time or paying it at all? What if they have no qualms about destroying the residence?
While the benefits of rental property tax advantages are great, you consequently have to know your own limits. If you think you're up for the challenge of being a landlord, however, this might be a wise choice to generate extra income in the real estate investment sphere.
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