Your second home is a material asset, a source of tax benefits and a means of generating cash flow. The following strategies will keep your investment primed for ongoing appreciation.
- Use all tax exclusions allowed by the government. If you sell one property, try to make a tax deferred exchange and re-invest your money in another property. Claiming depreciation on each rental property reduces your taxable income. Consult with a tax attorney to maximize your yearly deductions.
- Look for ways to reduce your operating costs by increasing the energy efficiency of the building. Keeping your property well maintained preserves its value and ensures that you can attract more tenants at a higher rent.
- Create a schedule for incremental rent increases that keep pace with market standards.
- Build up equity by making additional yearly payments to principal.
- Reduce the amount of interest you pay over the term of the loan by refinancing to a shorter-term mortgage.
These strategies will insure a greater long-term return.
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