Rental properties have been and probably always will be a great investment for any investor or business person. Their value is based on the land they are built on as well as how livable they are. Still, it stands to reason that the more land you own, the better your future looks. The only thing we’re not readily making more of at this point in time is land. But what benefits are there to investing in becoming a landlord? Does that really require investing with a small business loan and is it worth it? In short, yes.
As a general rule, purchasing rental properties of any kind can multiply an investor’s yearly and monthly revenue. Depending on how you structure the rent, your renters might be paying off your mortgage and loans while occupying the space for you. In addition to that money, you’ll have a huge tax benefit coming your way as well. In fact, there is a litany of hidden tax benefits hidden within the running and owning of a rental property of any kind.
Tax Benefits In Repairs
Any repair or update you make on a rental property is completely deductible on your taxes. That includes painting, staining and power washing a deck, replacing flooring and appliances or cabinets and so much more. Anything you can include under a “necessary repair” when you check in with your accountant as the end of tax season rolls around can be claimed. As you go throughout the year performing these updates and repairs, keep an itemized list and include receipts so that when you claim them you have the proof and exact numbers down to the cents to keep it all in order. This deduction will be a huge relief off of your expenses when the property is initially purchased and then promptly renovated.
The People That Make it Work
If you hire contractors or employees to do work on the rental you can claim them as tax benefits. Your accountant should detail that the money paid for the wages of each person is categorized under an “operational expense.” If you have property managers or contractors that build decks or paint the houses you should be able to lump those in under repairs and write it off once those tax bills start stacking up.
The Interest on the Property
One of the many perks of owning a rental property is that whatever loan is accruing interest is totally tax deductible. Thus, if you’re making a profit off of your properties and the IRS spots that, you still have a back up to ward off the extra expense to account for the interest. One strategy that many folks use is to grab a credit card that can accrue some interest and pay all of the rental’ yearly expenses through that. In general, the interest that loans are collecting will be your biggest outgoing monetary expense. So being able to write those off diminishes a large burden.
Interested in getting into the rental business? Reach out to Patriot Commercial Solutions. We’re passionate about pouring money into entrepreneurs that will fuel our local, Dallas, economy.