There is little doubt that the year 2019 proved great for real estate investors, what with the rise in rental demand and low-interest rates. Will the year 2020 be as great as 2019 or greater? Of course, it can be, but only if you prepare yourself for it. Here’s how you go about it:
#1 Going digital
Paperwork is passé. Digital revolution has made inroads in almost all aspects of our lives, and real estate is no exception. On the real estate front, going digital has been a game-changer in more ways than one.
Firstly, it reduced physical storage space that was used up by real estate documents. It provided the benefit of bank encryption that minimized the risk of document loss; it helped in preserving and retrieving all old records, such as financial statements, etc. You can even share information with business partners, attorneys and CPAs at any time and from anywhere around the globe.
Not only did going digital save money, but it also put all the real estate data on your fingertips via smartphone. You can compare agents, compare realtor commissions, and the like. It is also quick and convenient to talk to the bank, property manager or anyone associated with the deal, and much else.
#2 Protecting your assets
In the tumultuous world of real estate, you need to protect your assets and avoid getting into a worst-case scenario. Slipping into legal gray areas is all too easy and requires meticulous adherence to the rules and regulations.
You can protect your assets in various ways, such as by forming LLC that provides protection from liabilities and business debts. However, it also has many pitfalls, so beware. Another way to protect yourself is by getting your property covered by insurance. This includes insurance against property damage, theft, fire and other liabilities like tenant claims, loss of income due to business interruption. Opting for renters’ insurance and business interruption insurance coverage can help avoid these. There are many other ways, too.
People usually buy the insurance and keep paying the premium thoughtlessly year after year that, at times, results in wasteful expenditure. You must review your insurance every year. This way you will be able to include all the changes that had happened during the year, such as addictions and alterations to the building, and exclude all that does not need to be insured any more.
#3 Making yourself tax ready
One of the prime reasons for investing in real estate is to get tax benefits. If you are not meticulous in preparing your tax documents and regular in filing your tax returns, you can lose out on these tax benefits. By digitizing your tax documents, you will not only have them ready in time for the tax season but will also get ample time to update tax information.
Digital tools at your disposal become indispensable in making the tax information gathering process hassle free since they help keep track of your income and expenses throughout the year. They also make it convenient for you to not only upload and store documents and receipts but also to retrieve them easily.
Taking the help of your accountant is another way to save on tax, since they are clued up on tax strategies, such as pass-through deductions and casualty losses. They know what all business expenses are allowed by the IRS for rental property income. They can help you maximize deductions by 20% pass-through deduction and advise you on depreciation, which is a non-cash expense that reduces taxable income. They can advise you on 1031 tax-deferred exchange that allows the sale of one property to buy another, without paying capital gains.
#4 Acquiring real estate knowledge
It is crucial to gain and update your real estate knowledge from time to time. Look for sources for investing in real estate in 2020. Some of the best ones include real estate books by experienced investors, such as TheStreet; blogs, videos and podcasts, such as Bigger Pockets, etc.; and many others.
Conclusion
By adopting the right strategy for real estate investment, success is yours for the asking. These steps will help make 2020 a fruitful year for real estate investment.
Article by Merin Mathew. Mathew is a content writer and a digital strategist. She is passionate about content marketing and help people in developing effective online marketing strategies to boost business revenue and web conversion.
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