Archive for September 30th, 2010

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The answer to this question will depend on a variety of factors. The determining factors are included if you have a mortgage or own the rental property outright. In order to receive any tax breaks on property, you will need to itemize your taxes. This task should be dedicated to a CPA so it is assured that everything is done correctly and you will receive the tax benefits.

On the IRS website, you can learn how rental income should be reported when you file your taxes. There are some important things to take into consideration when filing. Always remember that any rent you receive for tenants is considered to be a source of income. If any improvements are made to the property by the tenant without charging you for those improvements, the value of the improvements is also considered to be income. If you have taken a security deposit that will not be returned, this is income.

It is very important for landlords to keep meticulous records of any and all transactions that are associated with the rental property. Even if the additional income hurts your tax return, the IRS demands complete accuracy when you report any income that resulted from a rental property.

While this may all sound overwhelming, there is a positive side. Rental properties are considered tax-deductible. This means that anything you do to maintain the rental property that incurs an expense, can be deducted from your taxes. You must have all documentation to support the claims of these expenses. If you file for a deduction, you have to support the claim with concrete proof.

It is important to know what expenses are eligible for a deduction. Basically, as  long as the expenses are related to the upkeep of the property or the administrative tasks associated with being a landlord, you can submit the expenses and claim them as a deduction. This can include any repair costs, interest that you pay for the mortgage and equity loans and the cost of advertising to find new tenants.

This does not mean that every single expense will be deducted. If you spend money that exceeds the amount of income you receive from rent, you will find that many of your expenses will not be deducted. If you have questions as to what can be deducted, it is best to consult with a CPA or contact the IRS. There is no rule that governs rental properties because every situation, and every landlord, is different.

Owning rental property can help on your taxes in other ways as well. In addition to the standard deductions, there may be other ways to save on taxes. In some cases, a landlord will obtain a home equity loan on the rental property. They will then use the proceeds to invest in insurance products that are non-taxable. This is legal and can be claimed on your taxes. You will need a qualified CPA to help with filing your taxes to make sure that your claimed deductions qualify. Rental property is a great source of extra income and it can save a lot on your yearly taxes.

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Interest rates are the lowest they ever have been are expected to remain low for the next year whilst the economy is given a chance to recover.

On the down side you will need a large deposit: at least 60% of the property purchase price and investment property mortgage rates are fairly high at around 5%.  You will need to browse the internet to get some basic information and then call an independent mortgage broker to find the best deal.

Buying rental property is a long term investment.  The key factors when considering what property to buy is to stick to some basic rules:

1. Location – this is all important. You need a location that will attract a lot of tenants so that when one tenant moves out you will easily be able to find another.  No tenant means no income and you will need to fork out to cover the mortgage.  Good locations are near universities, good schools, employment centres and good areas.  The best way to start finding a good location is to speak to your local rental agent.  They have the experience of knowing what rents well.  A nice-looking house in a not-so-good area won’t rent well on a continuous basis.

2. Decor: rental property has to be in good condition.  There has been an increase in rental properties as homeowners who have been unable to sell their house have rented our their house and the market is competitive.  And you want reliable, trustworthy tenants who care about their accommodation.  The property therefore needs to be maintained to a good standard.  When you look to buy rental property you need to budget enough to decorate it to a good standard in neutral colours, and an ongoing basis you will need to maintain the decor to keep the property in good condition.

3. Parking and transport: Be sure to buy a rental property that has it’s own parking.  Tenants can pick and choose their rental property these days and the majority want their own parking.  No parking often means no tenant or a tenant moving on after only a short time.

4.  Work out your figures carefully.  There are ongoing outgoings that must be factored in when you are buying rental property.  The income needs to cover the mortgage, 3 months worth of rent to cover void periods, insurance (buildings plus you can choose to insure against void periods), tax, maintenance costs and management costs (if you choose to use an agency).

5. Be prepared to keep your tenants happy.  If you are managing the rental property yourself, be available, return their calls promptly and deal with any problems as soon as you can.  If you are using a management agency then keep in close contact with the agency to make sure that everything is in order and to check that your tenants are happy.

Buying rental property should be considered a long term investment.  Keep money aside to cover void periods and be prepared to invest some time in it.  The key thing you must do is research the location, have enough cash aside for maintenance and then attend to it regularly.

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Determing Whether to Buy Or Rent your Dayton Home

When considering a Dayton home, you have two options: buy or rent. What is right for one person may not be right for another, which is why it’s important to know which is the best option for your individual situation.

Why People Rent?

There are a number of reasons why someone may either choose or be forced to rent, including sporadic or unpredictable income, a high debt-to-income ratio, a bankruptcy or foreclosure within the last six months, unpaid collection accounts or judgments, frequent relocating for employment or the inability to save enough money for a required down payment on the purchase of a home.

Maintenance Matters

As a homeowner, you will be responsible for any maintenance or repair issues that arise. This is a big consideration when choosing whether to rent or buy. When you rent, the property owner is responsible for repairs and it may not always be obvious that these issues can be very costly. Even though you be building up equity by buying (granted the economy turns in the right direction) you still have to deal with unexpected expenses and headaches.

How To Know When It’s Time To Buy

If you have steady income with a good employment history, can provide a down payment of at least 5-10 percent (3 1/2 percent with FHA) of the purchase price and are current with all debts, it may be time to consider buying a home instead of renting. In some cases, the cost of rent may even exceed that of a typical mortgage payment.

When deciding to buy, job stability is a big factor. If your job does not require frequent relocation and you plan to live in the home for at least 5-10 years, you may want to consider making the purchase. If you need to relocate after that, you may have enough equity from the sale to use as a down payment on another home.

Home Buyer’s Checklist

If you can answer yes to the following questions, you may be ready for home ownership. Your Dayton REALTOR® can help you to find the perfect home based on your individual needs.

* Have you been steadily employed for at least one year, but preferably two years?

* Do you plan to live in the home long enough to build equity?

* Can you provide a down payment and still have enough money left to pay for closing costs, utilities and home furnishings?

* Are you current on all debts, including auto loans, credit cards, etc.?

* In addition to any current debts that you may have, can you afford a monthly mortgage payment which will likely include property taxes and insurance?

* Do you have the time to devote to shopping for a home and comparing interest rates from various lenders?

* Have you checked your credit reports for inaccuracies and disputed anything that needs correction with each of the three major credit reporting agencies?

The decision to buy or rent is a very personal one that can only be determined after a careful evaluation of your situation. A Dayton REALTOR® can show you the perfect home and a lender can tell you whether or not you can afford it, but it’s up to you to make the choice as to whether or not you are ready to make the move.

Greg Greenwald is a eCertified 2.0 Realtor with Prudential One in Troy, Ohio. He is also a private investor and owner of Greg Greenwald, LLC, a company that buys and sells Real Estate throughout the Greater Dayton and Miami County Ohio area. He’s a member of GDREIA (Greater Dayton Real Estate Investors Association) who helps beginning and seasoned investors alike. Greg’s education began at Sinclair Community College studying Real Estate and Property Management and continues today personally studying under some of the top Real Estate experts in the county. Greg prides himself by providing his clients uncompromising personalized service. Contact Greg today at (937) 573-6917 or visit Greg’s Dayton Realtor Website for more information

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