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The Rueth Team - Denver's Top Mortgage Company

Investment properties have tons of tax advantages.

By Nicole Rueth - April 24, 2019

Tax advantages might have been muted for primary homes.. but they are still in abundance for investment properties!  Let's start with Schedule E  which is a gold mine!  You can deduct all the costs associated with the property as well as a portion of your home and mileage if you manage the property... PLUS.. the phantom expense called Depreciation.  I love this one as a lender since I can add it back when I qualify you.  

When you sell this investment you will have capital gains and a recapture of the depreciation.  However, with the use of a 1031 Exchange.. you can keep kicking that can down the road right up until you either die and give those properties to your kids OR... even better.. buy an investment home which you then, after a year, convert to your retirement home.. brilliant!

Lastly.. have you heard of Opportunity Zones??.. you should.  Yet another tax benefit opportunity.

Knowing your tax advantages is key to making the most of your investment strategy.

It is truly cheaper to rent than buy

By Nicole Rueth - April 17, 2019

I can't argue the fact.. it is cheaper to rent than buy in Denver today I have conversations with many first time home buyers who are frustrated that it is cheaper to rent than buy.. putting their purchase on hold. Are they wrong? Nope! They’re not… they’re right. I am seeing numbers ranging from $1602 average rent for a 850 sq ft apartment to $2100 median rent for a home in Denver. The median purchase price in the Denver metro as of March is $415,000. Many comparisons will show a purchase with 20% down. But let’s be realistic… most first time homebuyers do not have 20% to put down. So a $415,000 home with 5% down would be an estimated $2450 including taxes, insurance, and mortgage insurance. If I stop there.. it IS cheaper to rent than buy. ​But let’s not stop there. Let’s break this down just a bit… 1. Rent continues to go up… the average rent increased 6% year over year, 1.4% just in the last month. So next year that $2,100 median rent will be $2,226; then $2,359; then $2,501. Meanwhile the purchased home will stay at $2,450. In fact.. it will go DOWN once the mortgage insurance falls off. ​ 2. In 5 years, the homeowner will have gained $35,545 in equity through principle reduction... just by paying their mortgage. While the renter might or might not get their security deposit back. ​ 3. Assuming Denver’s 30 year historic average of 6% annual appreciation; the homeowner will have gained an additional $115,000 in appreciated value in 5 years. While the renter is paying $700 more a month in rent. ​ 4. The homeowner will have the choice to convert that home into a rental, allowing the renter to pay increasing rent, building the homeowners net worth every single month! When you or people you care about say “it’s cheaper to rent”; acknowledge that they are correct… but then.. dig a little deeper. Share with them the vision of building long term wealth. The kind of wealth no other investment available provides. ​Want to schedule a time to explore your personal financial goals and how real estate can get you there? Or have questions about what buying would look like for you? Let’s do this! Call me today at 303-808-2300.

Using Your Mortgage for a Better Tax Return

By Nicole Rueth - April 12, 2019

April means one thing to many – tax season. As we enter into this year’s tax season, home owners are worried about what a change in administration and, therefore, change in tax laws, means for their return this year. According to NerdWallet, less than half of all taxpayers — 48 percent — understand how the new law affects their tax bracket, and only 51 percent of Americans are even aware there is a new tax law. 

To help quell some fears and give some background on what has changed, we’re outlining a few key changes that will affect taxpayers this season in regards to mortgages, as well as giving you a few ways you can use your mortgage to get a better tax return in the future.

New Standard Deductions

The change affecting the most households this year is the new higher standard deduction – $12,200 for single filers, $18,350 for heads of household and $24,400 for people married filing jointly. Taxpayers have always had a choice between taking the standard deduction or itemizing — taking individual write-offs for things like mortgage interest and charitable contributions — but because the standard deduction has gone up, itemizing will make sense for fewer people. In fact, TurboTax estimates nearly 90 percent of taxpayers will now take the standard deduction, up from about 70 percent in previous years.

New Limits on State and Local Income Tax (SALT) Deductions

Per the new laws, deductions are limited to just $10,000. While this change won’t be a burden to all homeowners, it will hit folks hardest in states with the highest property taxes, which include California, Connecticut, Illinois, New Jersey and Wisconsin.

Interest on Home Equity Loans

Starting this year, homeowners can deduct interest on home equity loans or lines of credit if the money is used to buy, build or improve your home – making a way for an additional write-off. However, if the cash is used to pay for other expenses – college tuition, for example – the interest isn’t deductible anymore.

Moving Expenses

Though not directly related to mortgages, moving expense tax allotments have now changed as well. In the past, people who relocated for a job and paid the moving costs could deduct most of their expenses, even if they didn’t itemize. The tax overhaul eliminated that deduction unless you’re an active-duty member of the military.

The Takeaway

Knowing the best road forward when filing taxes can be tricky, but we hope this quick summary gets you on the right track and gives you some conversation starters to discuss with your family or those taking care of your taxes.

If you’re looking to increase your refund next year, then it’s time to start thinking about buying! When you file your tax return for the first time after buying a home, additional expenses incurred on your HUD may be tax deductible, including prepaid interest paid at closing. Remember, tax laws change and building wealth through real estate has lasting effects beyond tax benefits or lack thereof. Contact us to find out how you can still come out ahead given the changes. The Rueth Team is here to assist – don’t hesitate to reach out today.

There are still tax advantages to owning a home

By Nicole Rueth - April 10, 2019

We are days away from tax day and there is a lot of chatter about how all the benefits of owning a home have been taken away.  I disagree.  Yes.. the tax advantages have been reduced, but we all know that Presidents and tax laws change.  But there is a constant that never changes...real estate builds long term wealth.. and that has not changed with the current tax law changes.

Women will have $1 Million LESS than Men in retirement

By Nicole Rueth - March 27, 2019

Fidelity put out a study showing only 29% consider themselves investors; only 1 in 4 are comfortable with their knowledge.  

We all know there is an wage gap.  But the investment gap is real.  Women on average have $1 Million less than men in retirement.  Knowing women live longer.. that cost is even greater.  I get how investing can be stressful.  But as a woman, I challenge you to educate yourself, because the desire to "stay safe" is costing you tax advantages and the benefits of the compound effect.  There are so many opportunities with podcasts, YouTube, and workshops... or set up a meeting with me!

Want to explore building your wealth through real estate?  Buying your first investment property?  Call me today, I'd love to set you up for success!