There are many benefits and reasons to invest in real estate.
Lower Your Taxes
Tax incentives for Main Line real estate investors can often make the difference in your tax rates. Deductions for rental Main Line home 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 the rental Main Line home. This includes mortgage interest payments, Main Line real estate taxes, insurance, maintenance, repairs, Main Line home management fees, travel, advertising, and utilities (assuming the 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 the amount of Main Line 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 the actual market value of your Main Line home. Because depreciation is a non-cash expense — you are not actually spending any money — the tax code can get a bit tricky. For more information about depreciation and various tax alternatives, ask your tax advisor about Section 1031 of the U.S. Tax Code.
Have a Positive Cash Flow
There are two kinds of positive cash flows: pre-tax and after-tax. A pre-tax positive cash flow occurs when income received is greater than expenses incurred. This sort of situation is difficult to find, but they are usually a strong and safe investment. An after-tax positive cash flow may have expenses that outweigh collected income, but various tax breaks allow for a positive cash flow. This is more common, but it is generally not as strong or safe as a pre-tax positive cash flow. Regardless of what kind of Main Line real estate you choose to invest in, timely collections from your tenants is absolutely necessary. A positive cash flow — whether it be pre-tax or after-tax — requires rental income. Be sure to find quality tenants; a thorough credit and employment check is probably a good idea.
One of the most important factors in determining a solid investment is the amount of equity you are purchasing. Equity is the difference between the actual worth of the Main Line home and the balanced owed on the mortgage. Benefit from Growing Equity While investing in Main Line real estate is relatively complex, it is often worth the extra work. When compared to other financial investments, like bonds or CD’s, the return on investment for Main Line real estate purchases can often be greater. The key to Main Line real estate investing is equity. Determine an amount of equity that you want to achieve. When you reach your goal, it’s time to sell or refinance. Determining the proper amount of equity may require the assistance of a Main Line real estate professional.