Landlord Tax Advantages
Landlord Tax Advantages
Hoping to capitalize on the economic recession many people are trying to build equity in real estate and earn money at the same time. One main path to doing this is to buy rental property and cash in on the tax advantages. What most people do not consider during the decision-making process, though, is that in order to do this, you also have to be willing to be a landlord.
First, let us examine some of the tax advantages of owning rental property. Writing off any excess mortgage interest and taxes assessed on your rental property is the first, most basic thing you can do. This is a real benefit for real estate owners, since it saves them upfront costs in the long run. You should also note, however, that you must amortize any mortgage points you pay, which is generally different from what you would do for your primary residence.
Next, you can write off any operating expenses you could feasibly incur also. You can write off, for instance, any utilities you will be providing. The same goes for expenses going toward repairs and upkeep of the property, as well as insurance premiums, and homeowner association fees if you own a condominium or a townhome, as just a few illustrations. It is also possible to have your rental property depreciate over 30 years, and hopefully its worth is still increasing during that time.
You probably love the sound of this arrangement. Bear in mind, however, that you also have to deal with any tenants to whom you rent out the property. There are sometimes great tenants out there. They keep up the unit, pay rent on time and notify you whenever anything major occurs that needs repairing. A lot of others are not, through, and this is where the limits of your patience and determination must be assessed prior to going forward. What if you have a tenant who doesn't value paying rent in a timely fashion or paying it at all? What if they damage something essential to your property?
While the rewards of rental property tax advantages are great, you consequently have to know your own limits. This might be a wise decision to generate extra capital in the real estate investment sphere, though, if you think you're up for the challenge of being a landlord.
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