How to Make Money Investing in Phoenix Real Estate
Tax incentives for Phoenix real estate investors can often make the difference in your tax rates. Deductions for rental property can often be used to offset wage income.
Tax breaks often enable investors to turn a loss into cash flow. For which items can investors get tax breaks? You could claim deductions for actual costs you incur for financing, managing and operating the rental property. This includes mortgage interest payments, real estate taxes, insurance, maintenance, repairs, property 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, providing deductions do not exceed the amount of the real estate income you receive.
Keeping good records is important for determining your current and future tax obligations, but it is equally important for determining the performance of your investment properties and its value when you decide to sell. Poor records make it harder for a buyer to evaluate the value of your property.
Deduct Operating Costs and Depreciation 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 the property. 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 adviser 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 real estate 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 Phoenix real estate investment 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 and perform a thorough credit and employment check. It is much cheaper to pay to screen tenants than incur rental income loss and the expense of finding a new tenant.
Use Leverage 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 property and the balanced owed on the mortgage.
Benefit from Growing Equity While investing in 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 real estate purchases can often be greater.
The key to Phoenix 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 real estate professional.
Thanks for visiting! Contact me at 480-213-1799 when you are ready to invest in Phoenix Arizona real estate investment property! I have helped many investors locate exceptional investment opportunities!
My Phoenix Home Buyer Guide provides helpful buyer tips and additional resources available to assist you with your home purchase and my Phoenix Home Sales Guide is designed to aid the Seller in maximizing net gain upon sale.
Sam Elam Phoenix Real Estate Agent and Associate Broker Full time Phoenix REALTOR® since 1990 ABR, CRS, GRI, e-PRO Prudential Arizona Properties 3701 E. Baseline Road, Suite F-102, Gilbert, AZ 85234
(480) 213-1799 Cell (480) 467-4900 Office (800) 592-3360 Toll Free Email Samyour Phoenix real estate questions for expert advice.
For expert guidance with your next real estate transaction, call Sam at 480-213-1799 Phoenix Real Estate Agent and Arizona Real Estate Broker Full time real estate professional since 1990
Email Sam your Phoenix real estate questions for expert advice.