It’s crunch time and time to get those taxes done! If you are building a future for you and your family and own Single Family Investment properties, make sure you don’t forget to add in that depreciation in your calculations! It is one of the many reasons why investing in residential real estate is such a big benefit that many people do not take into consideration.
Keep in mind this is for reference only. I am not an Accountant, CPA or Tax Attorney. If you own investment property, it’s merely a reminder to check and if you don’t own single family investment real estate, you’ll learn another benefit of why to invest in residential real estate. This is also for straight out rental properties – not vacation homes or your personal residence!
The First thing you are going to do is get ahold of your subject properties tax records. For Las Vegas real estate, this is really easy to do and you can request that from us by calling 702.592.3058. We do this for all of our Las Vegas real estate single family investment clients so feel free to ask for one and we can shoot it over to you because that is where we are going to get the following information.
At the very bottom of our sheets, there are three columns where we have Total Assesed, Improvements and Land. I’m going to use one of my old properties in Summerlin for an example.
Real quick, we are going to take the IMPRV value and divide it by the Total ASSD value for the following calculation: $50,464/$128,846 to come up with .392 x 100 = 39.2% or your Improvement Allocation %. This is a really important number because now we are going to take the purchase price (for this example it was $388,000 for another single family investor who purchased the property) to come up with the following calculation: $388,000 x 39.2% = $152,096. Now, for residential investment property we get to use the straight line depreciation method with the value of 27.5 years. So, take the $152,096 divided by 27.5 years = $5,530.76. You now have your yearly depreciation that you can claim on your taxes for owning residential real estate.
I only bring this up because of how many people I come across who say that they are losing money on their residential investment properties because they have to come out of pocket a $100 or so a month and new real estate investors who don’t even consider depreciation in their calculations. While we certainly want to have a Before Tax positive cash flow for a really good residential investment, the depreciation that you can write off on your taxes needs to be taken into consideration.
Remember, this is only being provided as a reference and is not tax advice. Real estate professionals that understand what true real estate investing is will find you the properties that make financial sense without the speculation and will know how to perform the appropriate calculations for guidance in your decisions. Consult an investment advisor, tax attorney or CPA if you have any questions if residential real estate Investing is right for you.
If you have any questions or see a mistake, please leave a comment. I wrote this up in about five minutes so as always, open posts are free and only a reference. While the information is deemed reliable, it’s not guaranteed unless I specifically perform calculations when we represent you for the purchase or sale of Las Vegas real estate.
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Paul Francis, ABR,CRS | Coldwell Banker Premier | Las Vegas Real Estate | 702.592.3058
