ArticlesReader.com Menu
Newest Articles
Most Viewed Articles
ArticlesReader.com RSS
Submit Article
Login
Signup
Search the articles

Articles Main Categories
Advice
Animals
Automobiles
Business
Career
Communications
Computer Programming
Computers
Entertainment
Environment
Family
Fashion
Finance
Food
Health & Medical
Home & Garden
Humor
Internet Business
Internet Marketing
Legal
Leisure & Recreation
Marketing
Other
Politics
Reference & Education
Religion
Self Improvement
Sports
Technology & Science
Travel
Writing
Subscribe
Receive alert message from us when new articles submitted to our site for free.

Enter your name

Enter your email

Syndicate

















Related Products
Home::Home & Garden

Investment Property - Leveraging Rental Property Equity

Author : Richard Chapo
Owning investment property is a tremendous wealth building strategy. Thousands upon thousands of individuals have amassed great wealth by investing in rental properties.

Unfortunately, few investment property owners learn how to leverage equity in a way that maximizes tax deductions while creating and locking in equity gains. Instead, they leave themselves open to price fluctuations in the residential property market. These fluctuations can wipe out or severely reduce equity positions in property.

Housing Boom To End?

There is little doubt we are coming to the end of a huge boom market in residential properties. For the last four years, properties have appreciated at unheard of rates. The question, of course, is what happens when the market cools off? Will we simply see a price plateau or an actual drop in prices? While nobody is sure, the clear consensus is property owners should move to preserve equity while they can.

Protecting Equity Gains

Protecting equity gains in your investment property requires careful planning. This leveraging strategy is fairly simple, but can sound complex. Please keep in mind this is just an introduction to the investment property tax strategy. You will need to contact us to learn more.

The investment property tax strategy protects your equity gains by separating and leveraging them. The leveraging process is best explained with an example.

Scenario 1 – Without Tax Strategy

Assume you purchased a rental property in 1999 for $250,000 with nothing down. As of July 2005, the combination of loan payments and appreciation has resulted in a gain of $250,000. You have amassed wealth, but all of it is at risk. If prices drop twenty percent over the next year, you will lose $100,000 of your equity in the rental property.

Scenario 2 – With Tax Strategy

We are going to use the same exact scenario. It is July 2005, you have $250,000 in rental property equity, but all of it is risk. You decide to implement the investment property tax strategy and the following occurs.

Our goal is to protect the $250,000 in gain on the rental property while also maximizing tax reductions. The first step is to refinance the property with, typically, an interest only loan. A percentage of the equity gain is taken out of the property and placed into an equity index insurance product. The equity percentage is arrived at by determining the payment amount you can afford on the loan. Typically, it is tailored to match your current loan payment amount.

Going back to our scenario, what happens if property prices pull back 20% over the next year? You do not suffer the loss of $100,000 because the gain is sitting in your equity index insurance product. Essentially, it is a wash and you have protected the capital gains while capturing a stock market-based rate of return.

Ah, but it gets better.

Equity Index Insurance

The investment grade insurance product isn’t just any policy. Instead, the policy we use is tied to a stock market index. What if the stock market suffers a loss? Not to worry, this policy carries a guarantee that you will never lose a dollar, even if the market crashes. If the stock market did crash, the policy would simply credit you with nominal growth for the year in question. In all other years, the policy would grow with the stock market. On top of all of this, the money in the insurance product grows tax-free.

So, what has been accomplished? First, you have protected your rental property equity gains from home price fluctuations. Second, you have leveraged your equity into two growth channels, the stock market and appreciating house prices. Third, you have converted taxable growth [property appreciation] into tax-free growth [insurance].

With housing markets ready to cool down, this strategy effectively locks in your profits. Preserving equity gains should be a primary goal of any investment property owner.


About the Author: Richard Chapo is CEO of http://www.businesstaxrecovery.com" target="_blank">http://www.businesstaxrecovery.com - Obtaining tax refunds for overpaid business taxes. Visit http://www.businesstaxrecovery.com/articles" target="_blank">http://www.businesstaxrecovery.com/articles for more tax strategies and articles.


Source: http://www.isnare.com">www.isnare.com

Spam emails More free articles

Related articles


  1. How To Save Your Fruit Tree Blossoms From A Spring Freeze.
  2. Planting Roses - Tips And Ideas To Ensure Beautiful Results
  3. Helpful Ideas For Designing A Flower Garden
  4. Fertilizing Your Flowers And The Importance Of Choosing The Right Flower Food
  5. Choosing The Perfect Flowers For Summer
  6. The Best Flowers For Spring
  7. The Great History Of Roses
  8. How to choose your garden furniture and make it last
  9. Garden Leaf Blower Maintenance
  10. Garden Composting Tips- The Art of Composting
  11. Types Of Lawn Mower Batteries
  12. Mulching Benefits / Organic And Inorganic Mulch Types
  13. Soil Basics - Creating Fertile, Healthy Soil
  14. Everyone Needs A Spaghetti Garden
  15. Fall Planting
  16. Soil PH And Its Effect On Your Garden
  17. Caring For Christmas Trees
  18. It's Time To Select Your Snow Blower
  19. How to make your landscape look good.
  20. Introduction to bonsai tree growing: an overview
  21. How to Grow Wildflowers
  22. Make Your Fresh Cut Roses Last Longer!
  23. Bonsai Soil And Additives
  24. Tips For Buying Lawn Tractors
  25. Gifts for the Gardener
More related feeds
Pricing Real Estate: The Key for Results
We did a market study, and also retained a property manager to complete a “rental survey” to confirm that the rents in fact were below market, and that was the case. Then we countered to the seller as follows (and the seller had ...

INVESTMENT PROPERTY - LEVERAGING RENTAL PROPERTY EQUITY
Thousands upon thousands of individuals hit collected enthusiastic riches by finance in concept properties. Unfortunately, some assets concept owners wager how to investment justness in a artefact that maximizes set deductions patch ...

Investment Property - Leveraging Rental Property Equity
Thousands upon thousands of individuals have amassed great wealth by investing in rental properties. Unfortunately, few investment property owners learn how to leverage equity in a way that maximizes tax deductions while c...

8 Ways to Manage Your Real Estate Investment Risk
Buy properties that you can profitably improve. Sweat equity is the best way to build wealth fast and reduce the risk of leverage. It’s always a smart real estate investing technique when you can add value to your properties through ...

$20K Profit and Positive Cash Flow on Rent To Own with Longwood Deal
We have analyzed this deal to see how this particular single family home in Longwood would be as a rental property. Read the article Income, Depreciation, Equity Build Up, Appreciation and Leverage in Deal Analysis for an overview of ...

In Real Estate, Remember Class A (for Assets) - Zacks Analyst ...
We did expect commercial property REITs to be negatively affected by the problems in the credit markets which were brought on by the meltdown in residential real estate and a declining overall economy. So to answer your question, ...

Save Money in Taxes When You Sell
You can rent it, improve it, leverage it, cash out—you name it, someone has probably done it. But not all real estate is created equal. At some point you may want to cash in on your equity in a piece of investment property without ...

Can Investment In Rental Property Make You Rich
Investing in rental properties have become an excellent option for serious investors who wish to leverage on these properties, get maximum tax deductions from them as well as secure equity gains to ensure a steady flow of income each ...

Paul Geary: Microcosm of a Meltdown: The Greedy Lending to the Stupid
Owning rental properties is the great Democrat dream too. Your attempt to make this a "Republican" thing is clumsy. If their property had equity, they wouldn't have trouble selling a couple of them, especially in San Francisco where the ...

20 Real Estate Investing Tips to Becoming a More Profitable Real ...
But I would never make a lousy investment in real estate just to take advantage of a 1031 exchange. Do not over-improve or under-improve a property: Rehabbing a property, whether it is a rental unit or you plan to flip the home, ...

 

 

© 2007 articlesreader.com - All Rights Reserved