- Can your return be higher elsewhere?
- How do you take advantage of depreciation?
- How do you take advantage of a Sellers’ Market?
- How do you take advantage of the tax benefits of a 1031 exchange?
Based upon current rental rates in Fairlingon, the estimated cash on cash return for a one bedroom Fairlington Condo unit is between 3.5% and 4% before depreciation and repair expenses. Taxes, insurance, management fees, and condo fees can add up in Fairlington. I personally try to find a 6% cash on cash return on my investment properties before depreciation. You may be able to find a better return elsewhere, but there is something that appeals to investors and tenants alike in Arlington County and Fairlington. For those willing to consider another area for investments, please not that a 2% improvement on your return will provide you with as much as another $5000 per year in rental income!
If you have a unit in Arlington County that is fully depreciated, you are not utilizing your full tax benefit capacity by holding on to the unit. If you have held your home for more than 27.5 years, it is time to sell and find a better return elsewhere. Even if your cost basis is low, let's say at $50,000, your depreciation values are much less than if you are depreciating a property with a $350,000 cost basis. In the example above, the tax depreciation expense deduction is approximately $1800 per year at a cost basis of $50,000 versus a tax depreciation deduction of approximately $12,700 per year at a cost basis of $350,000.That’s a significant tax expense deduction and overall savings on taxes!
The tax code for investment properties has remained very investor friendly. You may be eligible to defer all your real estate gains through a 1031 exchange. Using a 1031 tax exchange is an excellent way to build wealth and investment properties tax deferred! Ask me about some great real estate investing strategies!
*Please verify all your tax implications with your tax advisor as tax codes change and your specific situation should be reviewed by your tax professional.
Call me Today to discuss your options 703-477-6022!
Northern Virginia REALTOR®
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