Twists and turns in the real estate market constantly pose a challenge to investors. The shifts can’t be viewed as all negative, however, particularly if you know how to evolve and use them to your advantage. Here’s how to build your portfolio while dealing with a changing real estate market.
The best way to become a savvy real estate investor is to become an educated real estate investor. Read up on what’s happening with real estate — both in the country-wide market and in cities and neighborhoods where you own properties or are thinking of expanding. Moving through 2018, the real estate market is expected to see a bump in short term rentals, a demand for homes with less square footage, and shifting rental demographics. By being aware of which direction the changing real estate market is leaning before it makes a seismic shift, you’ll always be able to stay ahead of the game when considering a new property.
Sometimes a changing real estate market isn’t due to customer demand or expectations; the decisions made in Washington can also affect turnkey investors. The tax code changes passed by Congress at the end of 2017 were a huge help to real estate investors. Owners of all properties organized as an LLC (considered a “pass-through organization”) are now allowed to deduct 20 percent of their business’s income. The income that gets taxed will be taxed at a rate of 29.6 percent — down from the previous rate of 37 percent. Keeping abreast of such changes is important, as they can help you save money when tax time comes around.
In addition to the helpful changes to the tax code as it pertains to pass-through organizations, there are tax deductions available to property owners that are renting out turnkey properties to generate income. Make sure to learn about the kind deductions available to you before you file each year. When you’re a business owner, there are a variety of line items that can be written off as business expenses.
When it comes to the tax benefits for pass-through organizations, in order to take advantage of those tax deductions, you have to do more than know about them. You also have to plan ahead and know how to structure your property portfolio in order to best protect your income. If you have questions pertaining to reorganizing your investments under an LLC, talk to your financial advisor to make sure all bases are covered.
Even in a constantly-changing real estate market, all of the old rules still apply when it comes to researching and purchasing properties. Even if a property seems like an excellent deal, it’s important to do your due diligence and know what you’re getting into before you make the purchase. Important considerations include learning about the property’s location and the market in the area, knowing if it is truly a turnkey property or if it will require costly remodeling before it’s rental-ready, and working out monthly rental rates and a purchase price that are realistic for your needs. It’s helpful to conduct a real estate market analysis to flesh out the real numbers behind a potential turnkey investment.
A changing real estate market isn’t all bad news. Like investing in any other industry, this simply means that you have to be educated and willing to strategize in order to make those changes work for you, rather than against you.