With home prices at an all time low, now is a good time to invest. When the real estate market was hot everyone was investing, now some are trying to get out since there payments are higher than they can afford. You should be able to find some bargains. The interest rates are still low, so you can't find a better combination. If you use a property management company, you won't even have the headache of dealing with maintenance issues or tenants. All you have to do is invest your money, and see a good return.

Keep These Factors in Mind

Location is key. If you are not familiar with the neighborhood, you need to learn about it. Is the area convenient for shopping and schools as well as the highways so people can get to work? If you buy in distant communities, the houses are cheaper but less attractive to renters who commute to work, with gas prices so high. Relying on a good realtor who is experienced in investment properties is a good idea. Be sure to get referrals.

With foreclosures at an all time high, you can find many awesome deals. The best ones get snapped up quickly. Be cautious about homes that have been available too long, it is either overpriced or something else could be wrong with it. The unfortunate side of all the foreclosures is that now banks are more hesitant to give loans out with no money down. Expect to put 20-30 per cent down for rental property.

Be sure to take into consideration fees that you will need to pay the property management company if you hire one. As with any other property, you need to expect that there will be other maintenance costs. You need to be making enough money on the property to take care of it as well.

When you buy, you may want to purchase a home warranty. This can be especially important for an older property. That way if you have to replace or fix covered items in the first year of purchase and it will have paid for itself. Usually AC is an additional charge so you have to decide if it is worth it or not.

Tax Advantages for Property Owners

Landlords deduct mortgage insurance costs, property taxes, and interest paid on their federal tax returns on the schedule E. If you include utility services such as water, heat and/or electricity for "free" to tenants, you can deduct these expenses from the income on the property. Likewise, all operating costs for rental property are tax deductible. These costs include maintenance and repair costs, like painting or replacing screens, broken fixtures and repair of appliances. Charges for liability insurance and rent loss insurance, if you choose to get them, are also tax deductible.

The IRS allows depreciation deductions for improving rental property. Items that qualify are would items like the installation of sprinkler system, upgrading the bathroom, purchasing new appliances or an air conditioner. You may decide to put on an addition or open up a wall, these would be regarded as improvements not operating expenses. These expenses are then deducted as depreciation over the life of the improvement. There are depreciation schedules for various items (ie carpets-5 years).

Depreciation Tax Advantages without Improvements

Depreciation costs are those accumulated by the normal use of any residential property including rental buildings. The IRS recognizes that a building wears out over time and permits landlords to deduct the cost of depreciation every year for up to 27.5 years. These deductions do not require you to spend money in order to use the deduction on your tax return. Just calculate the value of the building and the allowable depreciation. The only time you will spend money for a depreciation deduction is when you make improvements to the property. Realize that you will have to make some of these improvements to keep the home livable for renters.

Additional Tax Deductible Expenses

If you don't already have an accountant, you may want to hire one now. An accountant with expertise in rental properties will make sure that you get all the deductions offered to landlords; of course, their fees are a deductible expense. Other possible expenses are the wages of employees hired keep books, deal with tenants or make repairs. If you engage a property management company to take care of those things; their charges would be a tax deductible expense.

Meticulous Records Are Imperative

An accountant can fill out tax forms, but without thorough records of income and expenditures, will not be able help you very much. Whether doing your taxes yourself or hiring an accountant, it is essential to have receipts for expenditures and income. By keeping your receipts organized tax filing will be less stressful. You may want to write on the back of receipts to remember the details. Don't forget to keep receipts for ads

If you buy now, you can buy property cheaply and when the real estate market improves you can sell at a profit. In the meantime, you will have all the tax advantages of being a landlord plus the extra income of a rental property. You can enjoy a better income from rental investment than many other investment options available to you.


Consider our University City Condos for Sale in San Diego, CA.