Lower Your Taxes

Tax incentives for real estate investors can often make difference in your tax rates. Deductions for rental property can often be used to offset wage income. Tax breaks can often enable investors to turn a loss into a profit. For which items can investors get tax breaks? You could claim deductions for actual costs you incur for financing, managing and operating rental property. This includes mortgage interest payments, real estate taxes, insurance, maintenance, repairs, property management fees, travel, advertising, and utilities (assuming tenant doesn''t pay them). These expenses can be subtracted from your adjusted gross income when determining your personal income taxes. Of course, these deductions cannot exceed amount of real estate income you receive. In addition to deductions for operating costs, you can also receive breaks for depreciation. Buildings naturally deteriorate over time, and these "losses" can be deducted regardless of actual market value of property. Because depreciation is a non-cash expense -- you are not actually spending any money -- tax code can get a bit tricky. For more information about depreciation and various tax alternatives, ask your tax advisor about Section 1031 of U.S. Tax Code.

Have a Positive Cash Flow

When it comes to investing, everybody has certain goals and aspirations. However, we have found that there are certain guidelines every aspiring real estate investor needs to know:

1. Compare Property Values and Rents

Financial statistics only go so far; best measure of a property's market value is often sale prices of nearby properties. The same holds true for area rents. A low price can often be justified by a reasonable rent; renters who can afford a high rent can afford to buy instead, so reasonably priced rent is a need.

2. Be Careful - Tax Laws May Change

Don't base your tax investment on current tax laws. The tax code is constantly changing, and a good investment is a good investment regardless of tax code. The right property with right financing is what you should look for as an investor.

3. Specialize In Something You Know

Start in a market segment you know. Whether you focus on fixer-uppers, foreclosures, starter homes, low-down payment properties, condominiums, or small apartment buildings, you'll benefit from experience by specializing in one aspect of investment real estate properties.

4. Know The Costs Going In!

Know financial statements inside out. What are operating expenses? What are loan payments? Vacancy costs? Taxes? What does cash flow statement look like? These are key issues that must be addressed before making a solid investment.