As entrepreneurs find success with their primary business ventures, many search for the proper investments for their profits but many business owners get rid of concept after the recent downturn in real estate values, here is the few reasons that could change your mind.
Gain more leverage
Real estate is one of the few investment vehicles where using the bank’s money couldn’t be easier. The ability to make a down payment, leverage your capital, and thus increase your overall return on investment is incredible.
Buying rental property based on speculation of its value is a dangerous tactic since cash flow is the key. However, appreciation over the long-run is certainly realistic and at the least you should be considering a tax-deferred strategy. In the future, you may even consider a 1031 exchange, charitable trust, or an installment sale to lesson your tax liability further.
Tax free cash flow
It’s no secret that because lowering of value and mortgage interest deductions (if you leverage your capital), your cash flow should be tax-free. That’s right! The far majority of the time a an investor will never pay taxes on their cash flow and can wait for capital gains on the sale of the property in the future.
The tax write-offs against your other income
Depending on your classification as an Active Investor or Real Estate Professional and your income level, there is a good chance your rental property will not only give you tax-free cash flow, but an overage of tax deductions you can use against your other income.
Increased tax deduction strategies
Rental property affords investor with another amazing opportunity to convert personal expenses to possibly valid business deductions. Don’t forget that rental real estate is a business. This means that travel expenses to check on your properties and payments to family members who manage your properties (such as students away at college) can be deductible and increase the tax benefits when it comes to cash flow and the future sale of the property.