ProAPOD®

Real Estate Investment Software Blog

There are several ways for selling real estate without paying taxes, but I’ll leave that between you and the tax experts. For our purposes, we’ll simply discuss the tax-deferred 1031 exchange. It appeals to the investor who is agressively trying to build wealth, is one of the easiest to understand, and does provide a way how to avoid paying capital gains tax on sale of income property. Let’s take a look.

Vacancies are a part of life with rental property. Tenants come, and tenants go (it’s known as a property’s turnover rate). As a result, when tenants do go, the need to find a replacement tenant as quickly as possible places a huge burden on the real estate investor.

Whether you own one rental income property, a large apartment building, or simply rent out a bedroom in your motorhome. If you own a dwelling you rent out to tenants, chances are that you already adopted some policy about whether or not you will rent to tenants with pets. There is no landlord alive that hasn’t posted a “Now Renting” sign that invariable gets asked, “Do you allow pets?”

A mistake often made by beginning real estate investors is not to consider what the income property may be worth in the future. Resale is often relegated to speculation and serious focus on selling a property they haven’t yet purchased is simply ignored by many investors.

The loan-to-value ratio (LTV) is a measure related to mortgages that lenders use as a measurement of financial risk. Namely, because it determines the amount of funds a bank is willing to loan (how much financial risk it’s willing to take) to finance an investment. All of which, of course, is important to the real estate investor because it decides the amount of funds that can be borrowed against the investment (amount of leverage), the cash down payment required, and in turn the amount of financial risk to the investor. Let’s look at the calculation and then consider a couple of examples.

We’ve already discussed how depreciation (cost recovery) can be used by a real estate investor to obtain a tax deduction on a residential real estate investment or commercial real estate investment (nonresidential). So let’s give an example of how depreciation would get calculated for the tax allowance on a real estate investment.