As entrepreneurs find success with their primary business ventures, many search for the proper investments for theirprofits.
Of course, we can and should all start traditional tax preferred vehicles like an IRA and 401k. These are the bedrock of good 'benefit' planning for ourselves and ouremployees. More entrepreneurs should consider rentalreal estateas an important part of their portfolio.
Many business owners shrug off this concept after the recent downturn in real estate values, but here are a few reasons that may change your mind:
- Gain more leverage.Real estate is one of the few investment vehicles where using the bank's money couldn't be easier. The ability to make a down payment, leverage your capital, and thus increase your overall return on investment is incredible.
- Grow, tax-free.Buying rental property based on speculation of its value is a dangerous tactic since cash flow is the key. However, appreciation over the long-run is certainly realistic and at the least you should be considering a tax-deferred strategy. In the future, you may even consider a 1031 exchange, charitable trust, or an installment sale to lesson your tax liability further.
- Tax free cash flow.It's no secret that because of depreciation and mortgage interest deductions (if you leverage your capital), your cash flow should be tax-free. That's right! The far majority of the time an investor will never pay taxes on their cash flow and can wait for capital gains on the sale of the property in the future.
- The tax write-offs against your other income.Depending on your classification as an Active Investor or Real Estate Professional and your income level, there is a good chance your rental property will not only give you tax-free cash flow, but an overage of tax deductions you can use against your other income. With that said, this is something you want to discuss with your tax professional before investing so your expectations are realistic.
- Increased tax deduction strategies.Rental property affords investors with another incredible opportunity to convert personal expenses to potentially valid business deductions. Don't forget that rental real estate is a business. This means that travel expenses to check on your properties and payments to family members who manage your properties (such as students away at college) can be deductible and increase the tax benefits when it comes to cash flow and the future sale of the property.
- Rental real estate is a forced retirement plan.Americans are terrible savers as they lack self-discipline to put a monthly deposit into our IRA, SEP or 401k as small-business owners. However, buying a rental property is a significant commitment that you are required to commit to and maintain. You will always be grateful in the long-run when you don't give up on it and build future cash flow and wealth.
A lot of successful entrepreneurs has taken profits from their businesses over the years to invest in rental property. Based on this fact and the list above you should buy one rental property a year and already have clients with rental properties earning them money they never imagined they'd have.
The far majority of us will never get rich overnight. It takes long-term investing and a diverse portfolio to build true wealth. Don't forget real estate as an important part of the equation.
As a tax free offshore financial institution that is also very close to the USA, the Cayman Island is the perfect location in which to invest in real estate. Property taxes is a one time fee payable upon purchase. The Cayman Islands offer a tax free lifestyle on its year round sunny shores. With a healthy inventory of residential and commercial real estate these islands have a lot to offer for savvy property investors. As a Cayman Islands Broker IRG Ltd. is the leading integrated realtor. With sought after affiliates like Knight Frank and Luxury Portfolio, IRG Ltd. brings qualified vendors and buyers together locally and globally.
Call IRG on 1 345 623 1111 for more info or email [email protected] to make your move to the Cayman Islands