When you purchase a new rental or commercial property with investment intent, you must allocate a portion of the purchase price to improvements and the remaining amount to land. The reason for this practice is that you cannot depreciate land, only improvements. This makes sense because dirt lasts forever.
Depreciation is the reduction in value of a property over time due to the particular wear and tear on the asset. Residential properties are depreciated over 27.5 years, while commercial properties are depreciated over 39 years.
This reduction in value is a current expense, yet no money comes out of your pocket. Sounds like a pretty awesome deal, right? You get to reduce your reported income by your annual depreciation expense without actually paying for anything!
But what is depreciation really? Do you think the IRS, our favorite government agency, would let you have it that easy? I’ll give you a hint: the answer starts with the letter “N” and ends with “O.”
In actuality, depreciation is similar to an interest free deferred loan with no time restrictions. You see, when you sell a property that you have been depreciating, you have to pay a thing called “depreciation recapture taxes” at a 25% rate. This 25% rate is multiplied by the total value of depreciation you have taken over the property’s hold period. So the income you are “sheltering” each month really isn’t being sheltered like you think it is, as you will eventually have to pay a portion of it back. Without prior knowledge (or having a good accountant), you could be in for quite the surprise!
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As property managers and owners you want to know what keeps tenants happy. And what keeps them around and also what can set you apart from the competition. This article will help you in your rental housing business. A new survey designed to help property managers and owners gain insight into what tenants care about the most in their apartments shows insight on:
- What will they pay more for?
- What drives them crazy?
- What makes them happy?
- What makes them sign a lease or renew a lease?
- What makes them move on from a property?
Don’t wait until something is broken on your property to fix it. Catching a problem and fixing it when it’s small can save you thousands of dollars down the road. As a landlord or property manager, examine your units regularly for these minor fixes and take care of them before they become a huge expense.
While making the decision to purchase and then rent out a property is one thing, the way in which you attract tenants to fill your units or homes is another. In fact, before you make the purchase, you should also be thinking about ways to entice users to fill your property's units or homes.
One of the services that we provide at Onyx Management Group consists of helping our clients find tenants. How do we do it? Well, we make a property look appealing to the point that an individual cannot say “no!”
Over the years, we have found many ways to help our clients make their properties look more attractive. Therefore, we decided to put together a list of a few tips that we believe will help make any rental property more attractive to prospective tenants.