There are many different reasons why people invest in property but the main reason is that it’s a tax benefit. Property investment allows many different deductions per investment. One of the highest tax deductions one will receive is when rental property is an investment.
One of the most common deductions for property investment is interest. Whether it’s the mortgage interest or interest on loans taken to improve a specific property, it’s all deductible. The items that are deductible reduces the taxable income that an investor has each year on their tax return.
Another common deduction for rental investment property is repairs. There is always something that has to be fixed. Each time a renter moves out it has to be repainted or the carpet has to be cleaned. Sometimes the carpet has to be replaced. There are many different things that have to be done to each property but usually normal repairs are deductible in the same year they are made.
Depending on how much property an investor has there may be a lot of travel involved. Both local and long distance travel is a deduction than can be taken. An investor has to decide if they want to deduct travel using the actual expense method or the standard mileage rate method. Long distance travel can include additional deductible items like meals and hotel accommodations. Make sure all receipts are kept just in case the IRS decides to audit.
Then there is Off the plan property. This is property that is sold prior to construction. The buyer normally will be given the property plans to show what the finished property will look like. There is a risk that one takes but those investors with a good eye have the potential for great capital gain by the time the investment is completed.