As business entrepreneur search success for their business ventures, many choose to look for the proper investment of their profits.
Of course, we all should start with traditional tax preferred vehicles like 401k and IRA. These considerably are your bedrock to good planning for your employees. It is advisable for entrepreneurs to consider rental estate as part of their portfolio.
A lot of business owners shrug off with this concept after the downturn of real estate values recently, but there are still reasons why you shouldn’t change your mind.
Gain more leverage
Real estate investment is one of the few vehicles where using bank’s capital couldn’t be easier. The ability to make leverage capital, down payment, thus can incredibly increase your overall return on investment.
Grow tax- free
Buying a property based on speculation is a bad tactic since cash flows play a very crucial part. However, this strategy is realistic and in the long run you should be using a tax- deferred strategy. You may consider a 1031 exchange, installment sales or charitable trust to lessen your tax liability further.
Tax free cash flow
We all know that because of depreciation and mortgage interest deductions, cash flows (if you leverage your capital) should be tax-free. That is right! Most of the time business entrepreneurs never pay taxes on their own cash flows, instead will wait for their capital gain on the property that they invested.
The tax write-offs against your other income
This depends on your classification, whether as a Real Estate Professional or an Active Investor, not to forget your income level, there’s a possibility that your rental will give you an average of tax deductions and tax- free flow of which you can use to your other income. To note, this is something important that you should discuss with your real estate professional prior to investing so that your expectation will turn out realistic.
Increased tax deduction strategies
Rental property offers business investors a new incredible opportunity to convert expenses to possibly valid business deductions. One thing that should be remembered is that real estate renting is a business. This means that expenses such as travel fair in checking properties and payments to members who manage the properties is deductible and can increase the tax benefits and cash flows in selling the property in the future.
Rental real estate is a forced retirement plan
Americans are awful savers. We don’t know how to put a monthly deposit to our SEP, IRA and 401k as small business entrepreneurs. However, acquiring a rental property is a commitment in which you are required to maintain. This is something that is worthy in the long run when build your own cash flow of wealth. I knew a lot of successful business entrepreneurs, and most of them have taken their profits from their businesses over the years in just investing in rental estate. Based on this date and aforementioned facts, I urged investors to buy a rental property every year and earn money you never have imagined. Being rich as we all know is not an overnight process. It will take long term investing a varied portfolio to build sufficient wealth.
Veronica Barfield is active in reading manuscripts that deals with real estate financing. People might think that she is a broad minded woman with interest on highly sophisticated scripts of laws, but she is indeed a nature enthusiast, a passionate woman who would rather go for a nature hopping than grandeur social gatherings.