Running an investment property is just like running a business. There's income, which is offset by expenses, and some of those expenses can be deducted. At the end of the day, those deductions will lower the investor's tax bill. For that reason, taking as many tax deductible expenses as possible can increase cash flow since less money will be going toward investment property taxes.
Retirement is something that most people look forward to. The part that some people are not quite prepared for is the retirement income they will need to live a comfortable life after they stop working.
One of our goals at Realized Holdings is to help clients grow their wealth through well-researched, low-leverage, passive real estate investments such as Delaware Statutory Trusts. Though DSTs are indirect investments (with a passive income flow), we do sometimes field questions pertaining to direct, or active real estate investments. One question that occurs on a regular basis is what, exactly, ownership interest in a property is, and what it means.
If there is a loss realized on a rental property that generates passive income for the owner, it is considered a passive loss, or passive activity loss. As the owner of a rental, it is important to understand what passive losses are on a rental property.
Buildings wear through normal use. It’s part of the old saying — nothing lasts forever. The IRS provides real estate investors with a tax benefit for the wear on their buildings. This tax benefit is called depreciation. Depreciation is a reduction in the value of an asset over time due to wear and tear.
Most people associate 401(k)s with retirement planning, but one-fifth of workers are actually covered under 403(b) plans. Collectively, these U.S. employees have banked close to one trillion in savings.
The earlier you establish a retirement plan and continue to make contributions, the better off you’ll potentially be. What better way to start retirement than to be financially prepared and stress-free?
Let’s say that you’re the direct owner of a rental property portfolio, and you’ve decided to sell the bulk of it. You’ve decided not to go the 1031 exchange route, understanding that capital gains taxes will be assessed on your profits.
As a brief background, in a traditional REIT structure, the trust owns property directly or through limited partnerships. However, suppose an investor contributes real property to a REIT. In that case, the investor must recognize any increase in the value (fair market value over tax basis) that has occurred and would owe taxes on that amount. In an UPREIT (an Umbrella Partnership Real Estate Investment Trust), the umbrella partnership (aka operating partnership) manages the assets and indirectly owns them through the REIT.
If you’ve poked around Realized Holdings’ glossary, you already know there are many different forms of real estate ownership. There is 100% direct ownership (also known as fee-simple ownership) and the equal-percentage joint tenancy. Then there is the fractional ownership, such as that offered through the Delaware Statutory Trust (DST) or tenants-in-common (TIC) set-ups.