By Othon Jarle
Looking to invest in real estate? Rusty Tweed is going to offer some valuable tax insights.
Investing in properties offers an excellent way to build your wealth, while also affording investors tangible assets. That said, there are a lot of important tax considerations that investors must keep in mind when buying or selling properties. Real estate expert Rusty Tweed is going to share some insights he’s learned over the years.
“Real estate investing has helped a lot of people build wealth,” Rusty Tweed notes. “This is especially true in hot real estate markets where property and rental prices have risen dramatically. That said, before jumping into the market investors need to do their homework, especially regarding taxes.”
The capital gains tax is especially important for real estate investors and particularly those who want to sell rental properties. The capital gains tax will tax your profit from a sale at 15 to 20 percent, depending on your overall income. This can amount to a hefty tax bill, especially if you sell a valuable property.
The capital gains tax can be offset by losses. While investors enter the market to produce profits, some investments may turn sour. If this happens, you may be able to offset some of your losses when you sell off a piece of real estate for profit.
“The capital gains tax is very important for real estate investors,” Rusty Tweed says. “The bill can be quite hefty and if selling a property this year will push you into a higher tax bracket, you may want to wait until you can offset losses elsewhere or sell your property without being pushed into a higher tax bracket. Another option is to turn your rental property into your primary residence.”
If you convert a rental unit into your primary property, you can exclude as much as $500,000 in capital gains taxes. Still, you’ll likely be subject to annual property taxes.
Rusty Tweed Talks Triple N Leases and Local Taxes
Another option to reduce tax liabilities is to use a Triple N or NNN lease. If your renters sign a NNN lease, they are on the hook for property taxes, as well as repair and upkeep. Many renters, however, will want to pay a lower monthly rental price in exchange for assuming these liabilities.
“Triple N leases can be very useful for property investors,” Rusty Tweed suggests. “Managing NNN properties is often less of a hassle because you don’t have to deal with so many taxes, repairs, and the like. Keep in mind, however, that renters may default, and you’ll have to assume responsibility for the property.”
Keep in mind, however, that tax laws can vary widely from state to state. City and local laws can also have a big impact on your property. It’s wise to read up on local laws both before you invest in property and before you sell said property off.
