Buying at tax deed auction can be a cheap and effective way of acquiring rental properties. Rental income provides steady returns, while still allowing you to hold the asset for future sale.
With the passage of the recent tax bill, taxes on pass-through income have dropped significantly – in some cases to almost half. Whether you own the property under your own name, an LLC, or a trust, rental property income qualifies for this low tax rate, providing that the property is separate from your primary residence.
These tax changes further benefit landlords by increasing the individual standard deduction. This allows renters to achieve a higher tax return, which could reduce the allure of home ownership tax benefits versus renting. Less incentive to purchase a home means that rental properties will see a larger pool of potential tenants.
Of course, this doesn’t mean bad news for the sale of the property. The housing market is currently seeing home prices rise as availability becomes more scarce and lending becomes more widely available. When it is time to sell your property, you’ll likely see a market with ample pricing available. As purchasers begin to save more with the above-mentioned standard deduction, history shows that down payments will increase and need for strict appraisals will begin to decrease.
The new tax laws also allow for more deductions from money spent on improving these rental income properties, meaning you can invest a little now, and see the returns steadily come in, while still taking advantage of these generous tax deductions.
Remember, landlords also benefit from title insurance. Having your rental units’ title properly insured means you are protected from adverse possession claims from prior owners, which is a very real risk with tax deeded properties. Contact Clear to Sell post-auction and we’ll clear any conditions relating to the tax deed sale in 20 days, meaning you can have the place ready for renters and steady income in the least amount of time.
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