Tag: tax benefits

Benefits of Owning A Vacation Rental Property

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Investing in a vacation rental property is one of the best ways to diversify your portfolio and income streams. While it might cost some money and take some work upfront, vacation rentals have many benefits and can work well for you in the long run.

Let’s dive into some of the personal and financial benefits of vacation rental properties and see if they’re the right choice for you.

Long-Term Wealth

We all strive to build long-term wealth, right? One of the most effective ways to build long-term wealth is through real estate, and vacation rentals typically don’t require a large cash outflow. Many investors opt to leverage mortgage financing, and over time, your guests help you pay down the mortgage and grow your short-term rental property’s equity.

Home Equity

Speaking of equity, vacation rental properties can help you build even more equity that can be used on down payments for more properties, home improvements, and more. While the housing market and home values can fluctuate, depending on where you decide to purchase your vacation rental property, the likelihood of your home value increasing is high, meaning more equity in your rental.

Tax Benefits

Owning a vacation rental property comes with many tax benefits and write-offs. If you utilize the property as a true second home, your mortgage interest and property taxes may be tax deductible. In addition, many of your expenses for things like maintenance, repairs, and improvements can be written off. Consult with a tax professional to learn all the ins and outs of tax benefits. 

Dual Usage

There’s more to vacation rental properties than just business and financial benefits. You can also use your vacation rental property when you need to take a little getaway from reality. This provides a great home away from home to create memories, host family and friends, or just have some much-needed relaxation time.

Vacation rental properties come with many perks and can be an excellent option for your next investment! If you have any questions or want to learn more, we would love to provide our expertise and help in any way we can! 

Benefits of Buying An Investment Property Before Your First Home

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Purchasing your first home is an exhilarating moment and a huge life milestone, but with all the excitement comes the financial side. Homes are expensive and require monthly mortgage payments, property taxes, unexpected repairs, home updates, and more. 

Many people consider purchasing an investment property before buying their first home to help with their financial commitment. Let’s dive into a few benefits below.

Cash Flow

The biggest benefit to buying an investment property before your first home is the monthly cash flow they provide. Purchasing an investment property and finding tenants to rent it out can provide a steady stream of income that can help you save up for future investments, like your first home. 

Build Equity

Another huge benefit is building equity. Investment properties allow you to get your foot in the door and build equity until you can afford to purchase a home in the neighborhood you want. As a property owner, you can eventually leverage enough cash for the home you want and have more opportunities for mortgage loans. 

Tax Benefits

Owning a rental property also comes with many tax benefits. One of the biggest tax deductibles for property owners is interest, including on your mortgage loan or if you use a credit card. 

Other tax benefits include:

  • Operating expenses
  • Cost of repair
  • Use of personal property
  • Travel expenses
  • Legal services

Increase Your Wealth

While real estate investments can require a lot of dedication and patience to be successful, they can increase your overall wealth. Real estate investments appreciate over time, which is excellent for your future wealth when you sell the home.

If you have any questions about purchasing an investment property before your first home, reach out to us! We are always here to help.

The 5 Ways Your Finances Change After Buying A House

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Being a homeowner or investor is more than just having equity and a place to call home. It changes your life physically, emotionally, and financially. Before buying a house, make sure you’re ready for these five financial changes. 

1. Your credit score will drop.

Once you get a mortgage, your credit score can drop 10 to 40 points, so don’t be alarmed. You’re taking on a lot of debt, so that’s why it falls. But the drop is temporary. One study from LendingTree discovered it takes about nine months for your credit score to recover. Once it improves, paying your mortgage on time each month will boost your score. 

2. You have more costs.

Compared to renting, your costs will seem like a lot, especially when there are costs that new homeowners forget or didn’t consider. Some of these costs include pest control, lawn maintenance, HVAC maintenance, taxes, and possible HOA dues. Utilities will also increase if your new home has more square footage than your last place, and you’ll need new insurance coverage. 

3. Savings is important.

Unexpected expenses like repairs and breakdowns are common homeowner problems and aren’t always budgeted for initially. This is why a savings or an emergency fund is crucial. Get ahead of the game by saving three to six months’ worth of expenses. This should include your mortgage payment, utilities, and other regular bills. 

4. Late payments don’t exist.

One late payment is a catastrophic avalanche of severe consequences. Most lenders have a two week grace period, but if it’s not paid by then, you’ll get charged a late fee. The late payment will also hurt your credit score. If you hit three months of being behind on a mortgage, the lender can foreclose your home.

To avoid this, create a monthly budget or take advantage of the several applications that can help you budget. You can also start automatic payments or monthly reminders, so you don’t miss a payment. If you do miss a payment, contact your lender immediately and ask for a goodwill gesture of removing the late payment from your credit report. You might be surprised by people’s kindness over a mistake. 

5. New tax benefits

As a homeowner, you’ll get a new tax deduction compared to when you were a renter. Your real estate taxes and mortgage interest could create tax savings for you later. Especially as a new homeowner, it’s essential to talk to a professional to see if you can maximize your deductions and hopefully get more cash.

 

If you’re ready for these five financial changes to your life, then contact me today to begin your home buying journey. We are here to help–(512) 721-1094 or dbrown@talkpropertymanagement.com.