by Karen B
With interest rates so low, people are looking for new places to invest their money. Housing prices at an all time low, consider investing in rental homes. Let the low interest rates work in your favor as you purchase homes to rent with only 20% down.

Some Things to Keep in Mind

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

With foreclosures at an all time high, you can find many good deals. The best ones get snapped up right away. Be cautious about homes that have been available too long, it is either overpriced or something else could be wrong with it.

The downside of all the foreclosures is that banks are more hesitant to give loans out with no money down. You should expect to put 20-30 per cent down for rental property. You want to be sure that your monthly payments leave room for profit.

Be sure to factor in fees that you will need to pay the property management company. 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.

Rental Properties Give Offer Owners Tax Advantages

Basic tax advantages landlords achieve from their investment in real estate properties are like to those of homeowners. They are able to deduct property tax expenses and mortgage interest costs from your federal tax return.

In addition to the above mentioned deductions, the landlord has more tax incentives. Furthermore, all operating expenses for your rental property are tax deductible. This includes maintenance and repair costs, like repainting or replacing windows, gutters and floors. Fees for liability, property and rent loss insurance are also tax deductible. The IRS gives depreciation deductions to encourage improving rental properties. Improvements include installation of features such as a swimming pool, new furnace or air conditioner, or any new appliances and upgrades to the kitchen. Adding on another room or a patio to the rental home is classed as an improvement. These also would be considered an improvement, not an operating expense. These expenses may not be written off as operating expenses, they are written off as depreciation of improvement deductions.

Depreciation Tax Deductions without Improvements

Depreciation costs are accumulated by the normal use of any residential property. The IRS acknowledges the fact that a building wears out over time and permits landlords to deduct some of the cost of depreciation every year for up to 27.5 years. These deductions do not require you to spend anything in order to use the deduction on your tax return. Just calculate the value of the building and the allowable depreciation on that amount. 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.

Other Tax Deductible Expenses

If you don’t already have an accountant, you may want to look at hiring one now. An accountant specializing in rental properties will make sure that you get all the deductions offered to landlords; 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.

Careful Bookkeeping Is Essential

While an accountant is great at fill out the proper tax forms, without accurate records, they will not be able to do much for you. Whether using a professional or doing your taxes yourself, the most important thing is to keep receipts for all expenses. The better organized you keep your receipts the easier it is at tax time. You may want to make notations on the receipts to remember exactly what they went toward. Be sure to keep receipts and records for office supplies, advertisements, gas and car maintenance if you travel between properties.

Getting your feet wet now gets you in investment property when prices are low. Later as the housing market improves, you can sell at a profit, if you wish. Enjoy all the tax advantages of being a landlord and the extra income from a rental property. You may find a better return on your investment than other options open to you.

Explore Downtown San Diego Condos for Sale.

Article Source: Now is the Time to Buy Rental Property