Investment Property Tax Strategy

Today’s incredible buying market is open for investors looking to capitalize on current conditions In the late nineties up to 2005 the huge margin between what investors were paying for the property and the rent they were receiving made it close to impossible to receive a positive cash flow. Investors inevitably had to pay up to 40-50% cash down in order to make a profit on their investment. Many investors chose to back down and look for alternatives. For thirty years I have sold investment properties from single family dwellings to large apartment complexes, many with negative cash flows, or as they say, that fed the alligator. During this ten year period my investor’s clients purchased for two reasons. The first was hope for appreciation and the second reason was for tax incentives.

With my professional history and familiarity of the investment process, I am a firm believer that negative cash flow without strategic tax tactics is a lose/lose situation. That said, there are methods available that if calculated correctly with a professional tax advisor you can reap the benefits of a profitable investment venture. For example, begin by setting up your investment property with the right tax strategy prior to close of escrow. IRS will allow you to accelerate the depreciation in such a matter to take advantage of off-setting other income until hopefully appreciation together with income increases kick in. While IRS has done away with some of the tax depreciation acceleration methods, some do still remain. I am not a CPA or tax advisor and am not here to give tax advice, but merely raising questions you should be asking your tax advisor and options that are available to you.

This leads me to the current market condition and purchasing investment properties. Sale prices are down; rental rates are down, but not at the same percentage as sales prices. This means the income to debt ratio is better than I’ve seen in over seven years making the probability of an investment with positive cash flows sky rocket. If you’ve thought of investing in real estate, all things considered, now is the time. Now I don’t say that lightly as I know better than most the erratic roller coaster the real estate market can be. I know this business and I can tell you there are now cash flow deals with 20% down or less. Call or email me if you would like to talk shop with no cost or obligation about possible investments you’re considering.