As the gloom of tax season looms closer and closer, I’m sure you would love to hear some great financial news. Check this out: investing in real estate not only gives you a jump start in saving for the future, but it can actually help you save money with your taxes.
Though it is prudent to invest in traditional tax-preferred, money-saving vehicles such as a 401K and an IRA, real estate investment is starting to play a more crucial role in the successful investor’s portfolio. Due to the real estate market crash of 2008, many have shied away from this type of investment thinking it is a volatile and unpredictable resource. However, in recent years, the opposite has come to be true and hundreds of ordinary people have been able to become financially free as a result of fix & flip retail investments.
Top 5 Reasons to Invest in Real Estate:
1. You can obtain a tax-free cash flow
If you’re looking to invest in properties to rehab and then rent out for a steady cash flow, you’re in luck! Thanks to depreciation and mortgage interest deductions (should you leverage your capital), your cash flow on any rental real estate investments should be tax-free. The majority of the time, an investor won’t have to pay taxes on their cash flow from rental properties. Another major plus will be the capital gains you will receive should you choose to sell your fix & flip property in the future.
2. You can use tax write-offs against other sources of income
You will definitely want to discuss this option with your tax professional to ensure your investment expectations are reasonable. However, it is the case for most real estate investors with rental properties to receive not only a tax-free cash flow, but an overage of tax deductions on the property which you can use against other sources of income. This situation is dependent upon your classification as an active investor or REI professional and your average income.
3. You can leverage your capital
Purchasing fix & flip properties has never been easier. Hard money lenders can provide funding more quickly and easily than traditional banks, plus they can give you excellent tips on how to leverage your capital to obtain an excellent return on your investment. The best hard money lenders can provide even more funding if you bring a higher-quality and more profitable deal to the table. For example, Angela H. found a property which was estimated to be so profitable, Do Hard Money qualified her for 100% financing; meaning, they covered 100% of the property purchase price and rehab costs, as well as 63% of closing costs, with only $5,000 cash to close. These funding discounts provided her with a larger slice of the profit: an estimated overall profit of $51,818.
4. You can take advantage of increased tax deduction strategies
Investing in fix & flip properties and then using them as rentals can provide you with a great opportunity to use personal expenses as potentially valid business deductions. As both rental and retail real estate investments are businesses, this means that travel expenses to check on properties and payments to others who manage your properties (if applicable) can be used as deductibles, therefore increasing the tax benefits when it comes to your property’s cash flow.
5. You can use both retail and rental investments as a retirement plan
When it comes to saving for the future, it takes a great deal of discipline and frugality which most of us lack. Even many of the frugal ones unfortunately lost their retirement through investments which fell through or during stock market crashes. Fortunately, fix & flip investing can not only provide a solid retirement plan, but can help you restructure your credit, get out of debt and become financially independent without a 9-5 day job. With just one profitable deal, you can earn $10,000, $20,000 or even $50,000 within a matter of months. Also, those who choose to use their rehabbed properties as rentals are able to supplement their retirement with a continuous cash flow. Larry H. reached the age of retirement but didn’t have the funds to retire. He didn’t want to have to become a Walmart greeter. He heard about real estate investing and came to Do Hard Money to help him get started. On his first deal, he was able to make an estimated profit of $27,020 and only had to bring $705 cash to close! We were able to fund 100% of the property purchase price and rehab costs. His second deal was even more profitable, pocketing an estimated profit of $87,333 with only $5,135 cash to close. Click on this link to take a look at the details of his incredibly profitable second deal with Do Hard Money.