Learn More About Income
1031 Exchange to Purchase Investment Property and Defer your Taxes
A 1031 Exchange is a financial transaction that is used to avoid paying or to defer the tax liability on a specific investment property that you are selling.
How the rule works is the gain that you have on the sale of the property you are allowed to reinvest 100% of the proceeds into another property as long as that property has a equal or higher property value. This transaction is not to be done with out a 1031 tax professional that can walk you through the process.
If you would like more information or have more questions about a 1031 exchange please message me below. I am happy to answer your questions ASAP.
Appraised Value Vs Replacement Cost Value
There are 2 different valuations you will see on your appraisal once you receive a copy.
The first valuation is called the comparative analysis. This valuation is based on the similar sales that have happened in the same area of your home and are similar in age and size. The appraiser will make adjustments to the other sales to make it compare to your home. For example, if a home sold down the street but is 200 sq/ft less than your home. The appraiser will adjust the sales price of that home down by a calculation. The Sales Comparison approach is what the lender will use for the true value of the home.
The 2nd valuation that you will see on an appraisal is the replacement cost of the home. This is what the appraiser is estimating what it would cost to rebuild the home. The replacement cost of the home is important to note because sometimes this can be more than the value of the property. You will want to make sure your home owners insurance policy has enough coverage to replace the cost to build the home from the ground up.
If you have more questions regarding your appraisal, please message me below. I am happy to answer your questions ASAP.
Benefits of Buying Rental Properties
Owning investment properties might be easier than you think. Purchasing investment properties is a great way to grow your net worth and acquire wealth.
The biggest fear I hear that what if my tenant destroys the home? What if they do NOT take care of the property? What if I have to pay more taxes on the rental income? What if, What if. These are legitimate concerns.
However the what ifs can be overcome. Here are my tips on purchasing rental properties.
First, hire a property manager. Make sure the manager has a good record of finding great tenants. Most of them do. This is how they get paid. They will make sure they collect, follow the laws, have the right legal documents. A property manager will charge 5-10% of the rents. This can be negotiable.
My 2nd tip is to always purchase the investment property based on the potential income. NOT on the potential increased value over time. The value will appreciate however you want to make sure the income will cover the expenses of the rental property. If property values go down, you will be able to withstand the storm because you will be able to keep collecting the rent and paying down the mortgage.
My 3rd tip is to make sure you hire a tax accountant. The tax accountant will make sure you avoid paying too much to the IRS. They will also advise you on how to depreciate the investment property over time to get an additional tax benefit. It's always a great time to purcahse a rental as long as its the right deal.
Go to this link to see my top 3 tips on finding a great deal on your next investment property.
I would love to answer your questions. Please ask me a question below, and I will get back to you asap.