Put Your Tax Return In Real Estate
The average tax return this year is $3,129. Such an amount could go a long way toward a down payment on a first home or investment property. Lenders usually want to see a down payment of 5-10% and this can be an overwhelming sum for some people. However, on a $100,000 property, this can be as little as $5,000 which means, with your recent tax return, you’re already more than halfway there!
Potential first-time buyers may also be unaware of what a difference it will make to be a homeowner at this time next year. People who rent are, most likely, taking the standard deduction each year on their taxes (i.e. not itemizing expenses). This year, that would mean a standard deduction of $5,800 if you are single or $11,600 if you are married and filing jointly. Now, if you had a mortgage at 5% on a $200,000, you would have around $10,000 to itemize as a tax deduction from mortgage interest. In addition, you would have approximately $1,500-$3,000 to itemize in the form of property tax (property tax millage rate varies by county).
Think of the benefits to your taxes. These deductions come off the top of your gross income which means you will not pay nearly as much income tax when you are a homeowner with a mortgage. You will also be working toward establishing equity in your home as you pay toward your note’s principal each month. This is something that will never be accomplished when renting. With renting, your landlord gets all these benefits.
Or perhaps you already own a home and never thought, before this housing market came about, that you could ever expand your real estate portfolio beyond your primary residence. However, between the property prices available and the largest renter pool we have seen in a very long time (basically everyone who went through a foreclosure or short sale), more real estate investors and landlords are being created than ever before.
The demand for rental units is actually expected to increase over the next year or two and will remain strong for the next decade. This is due, in part, to a foreclosure adversely affecting a persons credit for seven years. Even money expert Clark Howard continues to preach about what an amazing opportunity exists in the real estate market for savvy buyers. So what are you waiting for? Put that tax return to good use today!
Mark Spain is a Realtor with RE/MAX, is one of the top 20 RE/MAX agents in the world and the top RE/MAX agent in Georgia for closings. He is Short Sales and Foreclosure Resource (SFR) certified by the National Association of Realtors and earned his Certified Distressed Property Expert (CDPE) designation. Mark is a native Atlantan and graduate of the University of Georgia. To get answers to your real estate questions, visit www.MarkSpain.com or call 770-886-9000. For details on considering a short sale, visit www.GreaterAtlantaForeclosureHelp.com.