Income Property

Income property has become a booming investment today. However, like any other investment, you need to have enough knowledge about it. Michael Gailliot Homes can help you on this matter. If you have cash lying around and you want to see it grow through an income property, then our real estate experts can assist you well on this. 

Income Property 

Income property is a real estate purchase that serves as a long term financial return in your home ownership portfolio. Residential rental properties are often more accessible to beginners because they’re less expensive. Less money is required upfront and that often means that it’s easier to get financing. When investing in property, it’s important to have a trusted realtor to assist you in making the right investment. Here is an overview of what investment real estate is.

Rental Income

Generating income is the top reason why investors purchase a property. Once you’ve secured renters, owning and renting property is a great way to make additional income. When it comes to dealing with renters, do your homework. Always have a written lease and make sure they keep the property in great condition – minimizing your expenses on the flip side.  

Types of Real Estate Investment

  • Home Ownership

This is the first goal – owning the home! Regardless of the ups and downs of the market, there’s nothing that brings more comfort than owning a home and having that sense of security. Although simply owning a home won’t increase your cash flow, it will be the most solid long term investment. Taking it a step higher, we want you to pay off your home. 

  • Rental Property 

Owning a rental property as an investment is a great way to increase your overall income. As a long term investment property, you will eventually see a sizable return when it comes time to sell, considering all of the different factors like the location and the comps.  

  • House Flipping

Investing in house flipping requires you to make updates and improvements to the home then selling it a short period of time. It’s an attractive option for people because of the quick investment and potential for high gains. The most important aspect of this type of property is to buy low!

Appreciated Value

No matter how you use your next income property, the most important aspect will be that the value of the property increases with time. Having a trusted realtor like Michael Gailliot with extensive experience in real estate will help maximize this opportunity. 

Is an Investment Property right for you?

Income property and real estate investing has its pros and cons, it isn’t for everyone. If you’re wondering whether you should be diving into real estate investment contact usWe have more than enough knowledge on the real estate market trends that we can guarantee you a great ROI on your income property. Michael Gailliot Homes cares for you, and with this, we will educate you on how to make the most out of your investment so you will be able to see it prosper. Aside from that, we will help you finalize the contacts and prepare all the needed documents to make sure that everything is legally bound.

Real Estate Income and Capital Gains

Anyone who invests in real estate actively or passively may find their income or profits subject to government taxes. Your investment portfolio could be taxed in two different ways: as personal income or as capital gains from a sale. 

Rental Income & Deductions

For properties that are being leased by tenants, the money you receive as rent must be declared as ordinary income on your tax return. Rental income is everything earned minus deductible expenses.

The only items that can be deducted are mortgage interest and repairs which restore the property to its original minimally functional condition. Repairs and maintenance expenditures can be deducted the year you spend the money. 

More extensive repairs such as new landscaping, installing energy-efficient windows and doors, renovations and additions are considered capital investments. Usually, these also allow you to increase the rent. 

Capital Gains on Home Selling or Home Flipping 

Projects that are earned through income property or investment properties are subject to capital gain taxes. The tax liability will be determined by federal requirements and the length of time that you have owned the property. Flipping a property in less than a year will subject you to a short-term capital gain, which is the same rate as your marginal income tax rate. For properties being sold after one year of ownership may quality for less tax liability with a tax on profits that range from 1-15%. It may be wise to consider adjusting the timing of your home sale to minimize exposure to the net investment tax. 

To calculate your capital gains (or loss) in your portfolio, subtract any sales costs, the original price and the cost of improvements from the sale price. Then account for depreciation you claimed on the property.

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