Investing in real estate, similar to any other endeavor, comes with a unique set of risks. And many of these risks are simply out of your control. For example, quickly changing demographics can be the difference between a successful commercial and residential real estate venture versus one that fails to meet expectations.
While the average real estate investor can earn anywhere from $70,000 up to $124,000, the possibilities are virtually endless. And the more you earn, the higher your real estate tax obligations will be. Because of this, it's imperative you have a solid tax planning strategy to limit your tax liability. Fortunately, you don't have to do it alone.
If you're a real estate investor or commercial property owner, one of the most valuable tax deductions is depreciation. While the concept of depreciation may not be foreign to most, it can become exceptionally complicated when coupled with taxes and commercial real estate. However, the IRS offers helpful guidelines to make depreciation-related deductions on business real estate easier and more transparent.
If you're considering legitimizing your real estate investment projects into a business, one of the first steps is selecting the best business entity or business structure. The structure of your business should be based on research and careful consideration of a variety of factors. Some of the most common factors you should consider concerning your real estate business structure include:
The 1031 exchange is a powerful tool that can help you save immensely on taxes following the sale of a property. It's a tax-deferral program that allows you to sell a property and then reinvest the proceeds from the sale into another property of greater or equal value.
Are you an individual or business who owns real estate? If so, you may be eligible to use the cost segregation tax planning strategy. In the simplest sense, cost segregation is a process where certain parts of leased or owned real estate are reclassified to optimize depreciation. Previously reserved for use by the nation's largest real estate owners and the major accounting firms, cost segregation has now become a go-to tax planning strategy for real estate owners and properties of all sizes. Let's take a closer look at cost segregation.
Did you know approximately 90% of the world's millionaires have created their wealth through real estate investing? Whether you're looking to pick up your first rental property or considering adding a commercial unit to your portfolio, there are also several tax benefits of owning real estate.
The allure of real estate with the possibility of positive cash flow is an intoxicating one to invest into. Some investors look to purchase fixer-uppers and invest the money into repairing them and then selling for profit. Others look to go into rental properties and over time build up multiple units. REIT’s (Real Estate Investment Trusts) are also growing in popularity for those who wish to invest in real estate on a small scale without spending a lot out-of-pocket. There are inherent risks of real estate investing and we’ll look at five of them below. These five risks will cover those looking to invest in rental properties and general real estate (non-REIT).
- Market Risks
- Legal Risks
- Poor Tenants or Property Damage