My Thursday Three's!
-How do taxes work on tenants rent money?
-What is "buy and hold" property?
-What is a "note"?
I typically/roughly know the answer to some of these and I hope the get more complicated as I decide to keep asking them haha! As always just want to see responses and what the pro's think!
@David Urena-Amaro great questions! Love the concept of "Thursday Three's"!
-How do taxes work on tenants rent money?- All of the rental money you receive is pre-taxed. So that means at the end of the year you will need to pay taxes on that rent received at your taxable income rate. However you typically have expenses that can offset the amount you are taxed at the end of the year. (mortgage interest, property tax, operating expenses, repairs, and depreciation). These expenses can offset they amount you are taxed if done correctly and you are working with an investment friendly CPA. I typically try to show all of my properties having a loss to minimize the amount I am taxed. However, that will not be the case if you are wanting to use rental income to help qualify for another investment property.
-What is "buy and hold" property?- A buy and hold property is an investment property that you purchase and intend to hold for an extended period of time. Real Estate is an excellent forgiving asset to hold long term and a hedge against inflation (we are seeing that with todays market conditions).
-What is a "note"?- A note is a written promise to repay a specified sum of money plus interest at a specified rate for the full length of the promise. Basically a mortgage. However, there is much more to this answer that I am not covering, for example note investing, because that is not my area of expertise.
Hope this helps.
Thank you a ton Ben! I was able to get more questions by you answering mine, beautiful break down though.
