by on November 7, 2011 Leave a Comment

Timing Year End Expenses

We are approaching the end of another year. While it is not yet time to prepare tax returns it is a great time to consider ways to maximize your tax benefits and minimize taxes. One way to do this is to consider the timing of potential expenses.

Some might advocate doing what can be done each year to lower taxes. In my opinion it is often better to look at the current year and review what you expect in the coming year. In this way it is possible to hasten or postpone expenses to minimize taxes in each year. Life changes may create substantially more income or expenses in one year and doing what you can to time other income or expenses can help moderate the impact of these life changes. [Read more...]

Filed Under: IRS
by on November 1, 2011 Leave a Comment

Understanding Multiple Real Estate Investment Strategies Does Make A Difference

This will be short and sweet for a couple reasons. First, tonight’s post is over at BiggerPockets Blog. If you’re not acquainted with it I give my full and energetic endorsement to it. I’ve been writing there for a couple years, or at least in a few weeks. It’s the best membership site for real estate investors in the country.

Anywho, I wrote about an ongoing case study over there this morning. It’s about combining several strategies dynamically to improve your end game results, which is spelled — Retirement Income.

BawldGuy Heads Up: Tomorrow (Wednesday) I’ll be out of touch with the world completely. Gettin’ some dental work done, and they wanna knock me out to do it. Works for me. :)

I’ll be available for calls beginning at noon Thursday. ‘Course by then I’ll be Jonesin’ for a fix. You can help me with that by callin’ me at 619 889-7100. Or you can, if you prefer, send me a note using the Contact BawldGuy button up top. Have a good one.

Filed Under: 1031 Exchanges, Capital Growth, Cash Flow, Depreciation, IRS, Retirement Income
by on October 31, 2011 Leave a Comment

Tax Considerations In Your Purposeful Plan

There are two basic approaches to real estate investing. Investing for current income or investing for future income. Both approaches are useful depending on where you want to go and where you are in your plan. This is where you might hear the BawldGuy talking about Purposeful Planning.

There are a number of ways real estate can create current income. The best examples would be through wholesaling and flipping. In this post, I want to look at rental property which can be selected to emphasize income or capital growth.

Rental property has four ways to create wealth or income.

• Cash flow
• Appreciation
• Equity buildup
• Tax savings

An investor can attempt to maximize one or more of these aspects of real estate. For those wanting to create the most current income would emphasize cash flow. An investor looking for capital growth might emphasize appreciation and/or equity buildup when selecting a property.
Regardless of your investment strategy, tax planning is an important consideration that needs to be planned for as well. Your Purposeful Plan should take advantage of tax strategies that minimize taxes during the investment period. [Read more...]

Filed Under: IRS, Purposeful Planning
by on October 24, 2011 7 Comments

What The Heck Is After Tax Cash Flow?

Sometimes we’re so close to something day to day that a question can get us doin’ the RCA Dog impression without warning. One such question is probably one asked of me the other day — which I thought might be on more than just her mind. She asked,

“When you say the ‘after tax’ cash flow is $X, what gets taxed, and is it like my paycheck’s ‘after tax’ sadness?”

Well, sometimes it’s the same. For many however, the after tax cash flow is actually greater than the before tax cash flow.

How can this happen?

Paradoxically, when your after tax cash flow is higher, it’s due, the vast majority of the time, to a loss. It’s a paper loss to be sure, but a loss nonetheless. In this case it’s what’s called ‘depreciation’. Simply put, depreciation is the IRS agreeing that buildings and many of the things inside them, even things appurtenant to the land, ‘depreciate’ in value over time. In other words, they wear out. [Read more...]

Filed Under: Cash Flow, Depreciation, IRS
by on October 19, 2011 2 Comments

Are You Getting the Most out of the Depreciation Available To You?

I think most real estate investors understand how depreciation creates a significant tax advantage. Depreciation is the means that allows an investor to have a positive cash flow while claiming tax losses. I think we can all agree that spending a lot of cash to create tax losses is a less than desirable way of saving money on your tax return.

I suspect though that many investors have no idea just how much depreciation can be taken in the early years of a property’s life. Spreading depreciation out over 27.5 years does help the bottom line, but if it was possible to spread a lot of that depreciation over a 5 year period I think you can see how that might prove to be a far better tax benefit.

Recently I talked about land improvements which are depreciable though land clearly is not. I gave you a taste of what can be carved out as a 15 year land improvement. Clearly, depreciating an asset over 15 years is better than 27.5 years. If you didn’t read the post you might want to take some time to read it. [Read more...]

Filed Under: Depreciation, IRS
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